SHOREWOOD PACKAGING CORP, SC 14D9, 1999-12-16

SHOREWOOD PACKAGING CORP
SC 14D9, 1999-12-16
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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SCHEDULE 14D-9

SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934

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SHOREWOOD PACKAGING CORPORATION
(NAME OF SUBJECT COMPANY)

SHOREWOOD PACKAGING CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)

COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)

825229107
(CUSIP NUMBER OF CLASS OF SECURITIES)

ANDREW N. SHORE, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
SHOREWOOD PACKAGING CORPORATION
277 PARK AVENUE
NEW YORK, NEW YORK 10172
TELEPHONE: (212) 371-1500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT).

WITH A COPY TO:
JEFFREY W. TINDELL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-3897
TELEPHONE: (212) 735-3000
FACSIMILE: (212) 735-2000

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ITEM 1. SECURITY AND SUBJECT COMPANY.

The name of the subject company is Shorewood Packaging Corporation, a
Delaware corporation ("Shorewood"), and the address of the principal executive
offices of Shorewood is 277 Park Avenue, New York, New York 10172. The title of
the class of equity securities to which this statement relates is the common
stock, par value $0.01 per share, of Shorewood (the "Common Stock"), including
the associated rights to purchase preferred stock (the "Rights" and, together
with the Common Stock, the "Shares") issued pursuant to the Rights Agreement,
dated as of June 12, 1995 (the "Rights Agreement"), between Shorewood and The
Bank of New York, as Rights Agent.

ITEM 2. TENDER OFFER OF THE BIDDER.

This Schedule 14D-9 relates to a tender offer by Sheffield, Inc., a
Delaware corporation ("Sheffield") and a wholly owned subsidiary of Chesapeake
Corporation, a Virginia corporation ("Chesapeake"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated December 3, 1999 (the "Schedule 14D-1"),
under which Sheffield is offering to purchase all Shares at a price of $17.25
per Share (the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated December 3, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Chesapeake Offer"). None of Chesapeake, Sheffield or
any of their affiliates are affiliated with Shorewood and the Chesapeake Offer
was not solicited by Shorewood. As set forth in the Schedule 14D-1, the
principal executive offices of Chesapeake and Sheffield are located at 1021 East
Cary Street, Richmond, Virginia 23218-2350.

According to the Schedule 14D-1, the purpose of the Chesapeake Offer is to
facilitate the acquisition of a majority of the outstanding Shares as a first
step in the acquisition of Shorewood. Chesapeake discloses in the Schedule 14D-1
that it is seeking to enter into negotiations with Shorewood with respect to a
merger with Sheffield (the "Proposed Chesapeake Merger") which it intends to
consummate, according to the Schedule 14D-1, as soon as practicable after
consummation of the Chesapeake Offer or in lieu of the Chesapeake Offer.
According to the Schedule 14D-1, upon consummation of the Proposed Chesapeake
Merger, each then outstanding Share (other than Shares held by (1) Sheffield or
any other direct or indirect owned subsidiary of Chesapeake, (2) in Shorewood's
treasury, and (3) by stockholders who properly exercise appraisal rights under
the General Corporation Law of the State of Delaware, as amended (the "DGCL"))
would be converted into the right to receive in cash the price per Share paid by
Sheffield pursuant to the Chesapeake Offer.

According to the Schedule 14D-1, the Chesapeake Offer is subject to the
fulfillment of certain conditions, including among other things:

The Minimum Tender Condition -- there being validly tendered and not
withdrawn prior to the expiration of the Chesapeake Offer at least that number
of Shares that, together with the Shares beneficially owned by Chesapeake and
its subsidiaries, including Sheffield, would represent a majority of all
outstanding Shares on a fully diluted basis (i.e., as though all options or
other securities convertible into or exercisable or exchangeable for Shares have
been so converted, exercised or exchanged) on the date of purchase.

The Rights Condition -- the Rights having been redeemed by the Board of
Directors of Shorewood (the "Shorewood Board"), or Sheffield being satisfied, in
its sole discretion, that the Rights are otherwise invalid or inapplicable to
the Chesapeake Offer or the Proposed Chesapeake Merger.

The Section 203 Condition -- Sheffield being satisfied, in its sole
discretion, that the provisions of Section 203 restricting certain business
combinations are invalid or inapplicable to the acquisition of Shares pursuant
to the Chesapeake Offer and the Proposed Chesapeake Merger (by action of the
Shorewood Board, the acquisition of a sufficient number of Shares or otherwise).

The Antitrust Condition -- the expiration or termination, prior to the
expiration date of the Chesapeake Offer, of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder, and any laws of Canada, the European Union, any
members state of
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the European Union, and any other foreign jurisdiction applicable to the
acquisition of Shares pursuant to the Chesapeake Offer.

In addition, according to the Schedule 14D-1, Sheffield will not be
required to accept for payment or, subject to any applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), pay for, and
may delay the acceptance for payment or, subject to any applicable rules and
regulations of the SEC, the payment for any tendered Shares, and may terminate
the Chesapeake Offer as to any Shares not then paid for, if, in the sole
judgment of Sheffield, at or prior to the expiration date of the Chesapeake
Offer any one or more of the Minimum Tender Condition, the Rights Condition, the
Section 203 Condition, the Antitrust Condition or any other condition in the
Chesapeake Offer has not been satisfied.

On December 3, 1999, Chesapeake filed a preliminary consent solicitation
statement (the "Consent Solicitation Statement") with the SEC, in connection
with its plan to solicit written consents from the stockholders of Shorewood
(the "Consent Solicitation") to, among other things, remove the current members
from the Shorewood Board and replace them with Chesapeake's hand-picked nominees
and to repeal each provision of Shorewood's By-laws or amendments thereto
adopted subsequent to November 22, 1999. THIS SOLICITATION/RECOMMENDATION
STATEMENT ON SCHEDULE 14D-9 DOES NOT CONSTITUTE A SOLICITATION OF REVOCATIONS OF
CONSENTS. ANY SUCH SOLICITATION WILL BE MADE ONLY BY MEANS OF THE SEPARATE
CONSENT REVOCATION STATEMENT (THE "CONSENT REVOCATION STATEMENT") WHICH WAS
PRELIMINARILY FILED WITH THE SEC BY SHOREWOOD ON DECEMBER 13, 1999, COMPLYING
WITH THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.

ITEM 3. IDENTITY AND BACKGROUND.

(a) The name and address of Shorewood, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.

(b) Except as set forth in the response to this Item 3(b) or in Annex A
attached hereto or as incorporated by reference herein, to the knowledge of
Shorewood, there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between
Shorewood or its affiliates and (i) Shorewood's executive officers, directors or
affiliates, or (ii) Chesapeake or Sheffield, or their respective executive
officers, directors or affiliates.

On June 20, 1985, Marc P. Shore, Kenneth Rosenblum and Charles Kreussling
each entered into a non-competition agreement with Shorewood. Each
non-competition agreement was entered into as a result of an investment by
Shorewood International, Inc. in Shorewood and was further to a stock purchase
and redemption agreement between Shorewood and each of Messrs. Shore, Rosenblum
and Kreussling. The non-competition agreements restrict each of Messrs. Shore,
Rosenblum and Kreussling from competing with Shorewood for five years from the
date of their termination of employment with Shorewood; provided that, however,
nothing prevents any of them from owning up to 2% of the outstanding stock of
any corporation whose shares are publicly traded on a regular basis.

Kamsky Associates, Inc. ("KAI"), of which Virginia A. Kamsky, a member of
the Shorewood Board, is the founder, chief executive officer, chairman and
principal stockholder, has been advising Shorewood for approximately three years
in connection with the establishment of a manufacturing facility for paperboard
folding carton packages in Guangzhou, Guandong Province, China (the "China
Business"), pursuant to the terms of a consulting agreement dated effective
January 1, 1996 (the "KAI Consulting Agreement"). Shorewood pays KAI a
consulting fee of $25,000 per month. Additionally, under the terms of a Profit
Participation Agreement between KAI and Shorewood (the "Profit Participation
Agreement"), KAI is entitled to receive up to 5% of Shorewood's allocable share
(presently 55%) of any "net profits" -- as defined in the agreement -- generated
from the operation of the China Business or from any sale of the China Business
or Shorewood's interest in the China Business (the "Profit Participation").
Transfer of the Profit Participation is subject to a right of first refusal in
favor of Shorewood. KAI may put its Profit Participation rights to Shorewood at
any time after three years from the production of the China Business' first
commercial product at the then fair market value of such interest, as determined
by a mutually agreeable third party appraiser. Under the terms of the Profit
Participation, Shorewood is required to exert its reasonable best efforts
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to cause Ms. Kamsky to be elected to the Board of Directors or other governing
body of the operating entity which manages the China Business.

Shorewood has engaged Jefferson Capital Group, Ltd. ("Jefferson Capital")
to act as its co-financial advisor in connection with the Chesapeake Offer, the
Consent Solicitation and related matters (see Item 5). R. Timothy O'Donnell, a
member of the Shorewood Board, is the President and principal stockholder of
Jefferson Capital. In addition, Jefferson Capital has served as a financial
advisor to Shorewood in connection with other matters. In connection with
Jefferson Capital's role as Shorewood's financial advisor with respect to the
Queens Transaction (as defined below), Shorewood, in November 1998, paid
Jefferson Capital a fee of approximately $1,300,000 and granted Jefferson
Capital, effective as of October 30, 1998, a warrant to purchase 50,000 Shares
at an exercise price of $16 per Share. The warrant was exercisable in full upon
grant and may be exercised by Jefferson Capital for a period of five years from
grant. In connection with Jefferson Capital's role as a financial advisor to
Shorewood with respect to the purchase of a 51% interest in CD CartonDruck, GmbH
("CD CartonDruck") and the commitment of L5 million to Shorewood EPC Europe,
Ltd. ("EPC") (each, a "Europe Transaction"), Shorewood entered into a letter
agreement, dated October 18, 1999, with Jefferson Capital pursuant to which
Shorewood agreed to compensate Jefferson Capital, as follows: (i) a retainer fee
of $100,000, payable upon execution of such agreement, (ii) a warrant to
purchase 50,000 Shares at an exercise price of $13 1/2 per share that is
exercisable in full for a period of five years from the date of issuance, (iii)
$250,000 upon closing of a Europe Transaction, in the case of CD CartonDruck,
and $100,000 upon closing of a Europe Transaction, in the case of EPC ( 1/2 of
the $100,000 retainer fee to be offset against each such additional cash fee)
and (iv) reasonable out-of-pocket expenses (including the reasonable fees and
expenses of Jefferson Capital's counsel) incurred by Jefferson Capital.
Shorewood has also agreed to indemnify Jefferson Capital for certain liabilities
arising in connection with the Europe Transactions, including liabilities under
the federal securities laws.

Shorewood has also retained Jefferson Capital to act as its co-financial
advisor in connection with Shorewood's previously announced proposal to acquire
Chesapeake (the "Jefferson Capital Letter Agreement I"). Pursuant to the terms
of such engagement, Shorewood has agreed to pay Jefferson Capital the following
compensation: (i) if an acquisition transaction is consummated, a fee of 0.20%
of Shorewood's total enterprise value and (ii) if an acquisition transaction is
not consummated, but Shorewood receives a break-up fee, a break-up fee equal to
6% of the break-up fee received by Shorewood. The foregoing fees will be payable
upon the occurrence, during the term of the Jefferson Capital Letter Agreement I
or within two years of its termination, of any event specified above, or upon
the occurrence of any event specified above with respect to which an agreement
was executed by Shorewood during the term of the Jefferson Capital Letter
Agreement I or within two years of its termination. The term "acquisition
transaction" in the Jefferson Capital Letter Agreement I means: (i) any merger,
consolidation, reorganization, recapitalization, business combination or other
transaction pursuant to which Chesapeake is acquired by, or combined with
Shorewood, or (ii) the acquisition, directly, by Shorewood, in a single
transaction or a series of transactions, of (A) any of Chesapeake's assets or
operations or (B) any outstanding or newly issued shares of Chesapeake's capital
stock (or securities convertible into or options or other rights to acquire such
capital stock). Under the Jefferson Capital Letter Agreement I, Shorewood has
also agreed to reimburse Jefferson Capital for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of its counsel and other
consultants and advisors) and to indemnify Jefferson Capital and certain related
parties against certain liabilities, including liabilities under the federal
securities laws, relating to or arising out of Jefferson Capital's engagement by
Shorewood.

There is a stock option agreement (the "Option Agreement"), dated April 17,
1997, between Shorewood and Marc P. Shore, pursuant to which Mr. Shore was
granted non-qualified stock options to purchase 150,000 Shares (the "Option
Shares") at an exercise price of $18.125 per Share. The exercise period is ten
years from the date of the grant. The Option Agreement provides that at any time
prior to the tenth anniversary of the grant, Mr. Shore shall have the right to
have Shorewood prepare and file a registration statement (and any other
necessary documents) with the SEC to comply with the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), so as to permit a
public sale of the Option Shares (unless to do so would interfere with another
material transaction by Shorewood). Furthermore, if at any time Shorewood
proposes

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to register any Shares (with some exceptions as detailed in the Option
Agreement) under the Securities Act for sale to the public in an underwritten
offering, it will at each such time give written notice to Mr. Shore and, upon
Mr. Shore's request within 30 calendar days, Shorewood will use its best efforts
to effect the registration of the Option Shares for which the request was made.

There is a stockholder's and registration rights agreement (the
"Stockholder's Agreement"), dated October 30, 1998, between Shorewood and
Messrs. Verebay and Kaltman. The Stockholder's Agreement relates to the
aggregate of 1,000,000 Shares issued to Messrs. Verebay and Kaltman pursuant to
a purchase and sale agreement with Shorewood. The shares received are
"restricted securities" under the Securities Act and may be resold without
registration only under limited circumstances. There can be no sale, gift or
encumbrance of the shares from the date of the Stockholder's Agreement until the
second anniversary of the closing date (the "Restricted Period") other than with
the Shorewood Board's consent or according to the terms of the agreement.
Otherwise, each stockholder shall have full rights as a stockholder, including
voting and dividend rights.

Messrs. Verebay and Kaltman may, at any time after the expiration of the
Restricted Period, give Shorewood a written demand for the registration of the
unregistered securities held by the stockholder which are not eligible for
distribution under Securities Act Rule 144(k) or otherwise under Rule 144.
Shorewood shall give written notice to both stockholders under the Stockholder's
Agreement and they shall have 30 days to deliver a notice to Shorewood demanding
registration of the securities. Shorewood shall then file, within 60 days of
receipt of the demand, the appropriate documents with the SEC to effect the
registration of the securities. Furthermore, if Shorewood proposes to register
securities for its own account, Shorewood shall include in its proposed
registration, all registrable securities held by a stockholder if requested by
the stockholder within ten days of receipt of notice by Shorewood.

The Stockholder's Agreement also provides that Messrs. Verebay and Kaltman
may designate one member of the Shorewood Board. Upon the expiration of Mr.
Verebay's term, if either Mr. Verebay or Mr. Kaltman (i) holds at least 400,000
Shares (subject to adjustment for stock splits and like events) and (ii) is then
either employed by Shorewood or subject to a then effective non-competition
restriction, that person will be entitled to be included in management's slate
of nominees for election to the Shorewood Board at the next meeting. If both of
them are so qualified, they shall jointly designate one of them to so serve.
Further, under the terms of the Stockholders' Agreement, for so long as Messrs.
Verebay and Kaltman own in the aggregate at least 800,000 Shares (subject to
adjustment for stock splits and like events), whichever one of Messrs. Verebay
and Kaltman is not then serving on the Shorewood Board will, provided he meets
certain qualification requirements, be entitled to participate in Shorewood
Board meetings as an observer, subject to certain limitations regarding
confidentiality. These provisions terminate under various circumstances,
including the occurrence of certain types of "capital events" and "change of
control" transactions, as defined in the Stockholders' Agreement.

Employee Severance Plan

On December 15, 1999, the Shorewood Board, upon the recommendation of the
Compensation Committee, adopted a cash-based employee severance plan. Tier 1
employees comprising Messrs. M. Shore and Liebman, as well as 11 Tier 2
employees, including Messrs. Rosenblum, Hogan and A. Shore, and 25 Tier 3
employees are eligible to receive severance benefits in the event of a
qualifying termination of their employment on or within two years following a
"change in control" (as defined in the severance plan) of Shorewood.

A qualifying termination of employment under the severance plan means (1) a
termination by the employer on or within two years following the date of the
change in control by the employer other than for "cause" (as defined in the
severance plan) or (2) a termination by the employee for "good reason". A
termination for good reason under the severance plan for a Tier 1 employee
includes any reason. A termination for good reason under the severance plan for
a Tier 2 employee means:

- a reduction in the Tier 2 employee's base salary or annual incentive
compensation opportunity in effect immediately prior to the change in
control,
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- the assignment to the Tier 2 employee of duties that in the aggregate are
inconsistent with the Tier 2 employee's level of responsibility
immediately before the change in control or any decline in the nature or
status of the Tier 2 employee's responsibilities from those in effect
immediately before the change in control, or

- the relocation of the Tier 2 employee's principal place of employment to
a location more than 50 miles from the employee's principal place of
employment immediately before the change in control.

A termination for good reason under the severance plan for a Tier 3
employee means:

- a reduction in the Tier 3 employee's base salary or annual incentive
compensation opportunity in effect immediately prior to the change in
control, or

- the relocation of the Tier 3 employee's principal place of employment to
a location more than 50 miles from the employee's principal place of
employment immediately before the change in control.

A Tier 1, 2 or 3 employee who incurs a qualifying termination of employment will
be entitled to receive a cash lump sum severance payment equal to:

- the sum of his or her annual salary, plus the highest annual bonus
received in the three years immediately preceding the change in control,
plus the value of contributions made by Shorewood to Shorewood's 401(k)
plan on the employee's behalf,

- multiplied by 3, 2, and 1 for a Tier 1 employee, Tier 2 employee and Tier
3 employee, respectively.

In addition, any payment made to a Tier 1 employee will be fully offset by the
amount payable to the employee under his employment agreement upon termination
of employment after a change in control.

A Tier 1, 2 or 3 employee who incurs a qualifying termination of employment
will also be provided with welfare and fringe benefits as if such employee had
continued to be employed by Shorewood for 3, 2 and 1 years for a Tier 1
employee, Tier 2 employee and Tier 3 employee, respectively; provided that,
however, benefit continuation shall cease if the employee obtains employment
providing substantially similar benefits.

Under the severance plan, Shorewood is required, if necessary, to make an
additional "gross-up payment" to any Tier 1 employee to offset fully the effect
of any excise tax imposed on any payments or benefits under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), whether made to such
employee under the severance plan or otherwise. The severance plan supersedes
the provision in the employment agreement of Messrs. M. Shore and Liebman which
reduced any payment thereunder so as to avoid an excess parachute payment and
the resulting excise tax. In addition, Shorewood will reduce any payment made to
a Tier 2 employee if such employee's after tax position is improved by the
reduction of the payment so as to avoid an excess parachute payment and the
resulting excise tax.

In general, Section 4999 of the Code imposes an excise tax on the recipient
of any excess parachute payment equal to 20% of that payment. A parachute
payment is any payment that is contingent on a change in control. Excess
parachute payments consist of the excess of parachute payments over an
individual's average taxable compensation received by him from the employer
during the five taxable years preceding the year in which the change in control
occurs. If the individual has been employed for fewer than five taxable years,
the individual's entire period of employment will be used to calculate the
excess parachute payment.

If a change in control of Shorewood were to occur on December 31, 1999, and
if each of Messrs. M. Shore, Liebman, Hogan, Rosenblum and A. Shore were to
incur a qualifying termination of employment immediately following that date,
the approximate amount of the cash severance payment payable to each of these
individuals would be $5,689,801 to Mr. M. Shore; $1,810,824 to Mr. Liebman;
$537,212 to Mr. Hogan; $575,200 to Mr. Rosenblum; and $527,204 to Mr. A. Shore
and the approximate gross-up payment payable to each of Mr. M. Shore and Mr.
Liebman would not be expected to exceed $3,612,890 and $1,691,476, respectively.

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Rabbi Trust

On December 15, 1999, the Shorewood Board authorized Shorewood to enter
into a "rabbi trust" agreement to fully secure benefits under the severance
plan. The trust agreement provides that Shorewood must contribute to the trust
the funds sufficient to fund all of the obligations under the severance plan
immediately prior to a change in control. Funds contributed to the trustee in
respect of any employee who does not incur a qualifying termination within 2
years following a change in control of Shorewood will be returned to Shorewood.

Equity-Based Awards

On December 15, 1999, the Shorewood Board resolved that all equity-based
awards granted to employees, directors and independent contractors of Shorewood
or any subsidiary of Shorewood which are outstanding immediately prior to a
change in control of Shorewood shall become fully vested and, if applicable,
exercisable upon a change in control of Shorewood.

ITEM 4. THE SOLICITATION OR RECOMMENDATION.

(a) and (b) AS MORE FULLY DESCRIBED BELOW, THE SHOREWOOD BOARD UNANIMOUSLY
RECOMMENDS THAT SHOREWOOD STOCKHOLDERS REJECT THE CHESAPEAKE OFFER AND NOT
TENDER THEIR SHARES PURSUANT TO THE CHESAPEAKE OFFER.

BACKGROUND

Beginning in February 1999, Shorewood began accumulating shares of
Chesapeake's common stock solely for investment purposes. The investment was
motivated by Shorewood's view that Chesapeake's stock was undervalued at the
time.

On June 4, 1999, Marc P. Shore met in New York City with Thomas H. Johnson,
President and Chief Executive Officer of Chesapeake, and two other Chesapeake
officials. At this meeting, Mr. Shore advised Mr. Johnson that Shorewood had
purchased shares of Chesapeake for investment purposes only.

Acquisitions of Chesapeake stock continued until July 16, 1999, at which
time Shorewood held 809,000 shares of common stock of Chesapeake, with an
approximate value of $26,201,646. This represents approximately 4.6% of
Chesapeake's outstanding voting securities.

Mr. Shore met again with Mr. Johnson in New York City on August 17, 1999.
Once again, Mr. Shore advised Mr. Johnson that Shorewood's purchase of
Chesapeake's stock was only for investment purposes.

Despite the fact that Chesapeake had announced its intention to do a stock
buyback, Chesapeake's stock price did not rise as expected by Shorewood and
began to decline, falling from $37 3/8 per share around the end of June 1999 to
approximately $30 per share by the end of July 1999. While Chesapeake's stock
reached a price of $35 per share in early September, the stock price again
declined in September and October 1999, falling to $27 1/2 per share by late
October 1999.

By the latter half of October 1999, Shorewood began to reassess its
position respecting Shorewood's holdings of Chesapeake's stock. Shorewood
believed that Chesapeake's stock was not likely to rebound because the
investment community lacked confidence in Chesapeake. Accordingly, Shorewood
began to consider a possible negotiated acquisition of Chesapeake.

At a meeting of the Shorewood Board on October 26, 1999, the Shorewood
Board authorized Shorewood to make an offer to negotiate the acquisition of all
of Chesapeake's issued and outstanding common stock for $40 per share.

On October 26, 1999, Mr. Shore called Mr. Johnson to inform him that a
letter would be forthcoming that would contain a proposal by Shorewood to
acquire Chesapeake (the "Shorewood Proposal"). During the telephone call, Mr.
Johnson, without inquiring as to any of the terms (including price) of the
Shorewood Proposal, informed Mr. Shore that Chesapeake was not for sale. Mr.
Johnson did, however, acknowledge his

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responsibility to bring the Shorewood Proposal before Chesapeake's Board of
Directors. Later that day, the following letter was sent by Mr. Shore to Mr.
Johnson:

October 26, 1999

STRICTLY CONFIDENTIAL

The Board of Directors
Chesapeake Corporation
1021 East Cary Street
Richmond, VA 23218

ATTENTION: Mr. Thomas H. Johnson, Chief Executive Officer

Dear Tom:

As you know, you and I have had a number of discussions regarding various
business arrangements between Shorewood and Chesapeake. I believe it is in both
of our companies' and their respective stockholders' best interest to move these
discussions forward. The purpose of this letter is to propose that Shorewood
acquire Chesapeake at a substantial premium to your current market value.
Shorewood's Board of Directors met today and has authorized transmittal of this
proposal to you and your Board.

Tom, I believe our proposal is a compelling one and would be very exciting
for Chesapeake's stockholders, employees, management and customers. We are in a
position to make a proposal to acquire Chesapeake at $40 per share in cash which
represents a 41% premium to yesterday's closing price and a 38% premium to the
20-day average closing price. This proposal reflects the input of our senior
management team, many of whom were part of the Shorewood due diligence team that
reviewed our potential acquisition of Field, and it also reflects a thorough
review of all publicly available information.

We have met with our financial advisors and financing sources and believe
that financing does not present an issue in this transaction. It would be our
expectation that the Board of Directors of Chesapeake would meet to review this
letter as soon as possible and authorize exclusive discussions with us. At such
time we would be prepared to discuss our financing plan for the transaction with
you (and would anticipate that our ultimate agreement to acquire Chesapeake
would not be subject to any type of financing condition). Further, we do not
believe that any significant obstacles such as anti-trust or other conditions
exist.

We are sensitive to the inherent difficulties faced by you in negotiating
this type of transaction in a public forum and are prepared to negotiate
confidentiality with you provided that you are prepared to begin these
negotiations in an exclusive and expedient fashion intended to result in a
transaction with Shorewood.

We feel that our proposal represents a significant immediate cash premium
to Chesapeake stockholders and represents a price that we believe your Board and
stockholders should enthusiastically support. We urge you and your fellow
directors to give serious consideration to the merits of this transaction and
reiterate our willingness to work with you in an expedient and confidential
manner intended to serve the interests of the stockholders of Chesapeake
Corporation.

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I look forward to your response to this proposal and look forward to
working with all of you in achieving this major event for both of our companies
and their respective stockholders.

Sincerely,

SHOREWOOD PACKAGING CORPORATION

/s/ Marc P. Shore
--------------------------------------
Marc P. Shore
Chairman of the Board

On October 29, 1999, Mr. Johnson delivered the following letter to Mr.
Shore:

October 29, 1999

Strictly Confidential

Mr. Marc P. Shore
Chairman of the Board & Chief Executive Officer
Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172

Dear Marc:

I have received your letter of October 26, 1999.

As you know, Chesapeake is not for sale. We are in the process of executing
our strategy of building a global specialty packaging and merchandising company,
which we believe is in the best interests of Chesapeake and its stockholders.

However, our Board of Directors, consistent with its fiduciary duties, will
consider carefully your letter. Completion of the appropriate analysis to give
due consideration to your letter and enable our Board to become fully informed
will require some time. I will respond to your letter no later than one week
from today, or Friday, November 5, 1999.

Sincerely,

/s/ Thomas H. Johnson
--------------------------------------
Thomas H. Johnson
President & Chief Executive Officer

On November 4, 1999, Mr. Johnson called Mr. Shore to suggest a meeting. At
the meeting, on November 10, 1999, Mr. Johnson (i) advised Mr. Shore that
Chesapeake was not for sale and that the Chesapeake Board had unanimously
determined that the Shorewood Proposal was inadequate and not in the best
interests of Chesapeake and its stockholders, (ii) expressed a willingness to
consider acquiring Shorewood at a price of $16.50 per Share in cash and (iii)
suggested that, given that Chesapeake was a Virginia corporation, Chesapeake
would be a difficult target to be acquired on an unsolicited basis. Mr. Shore
stated that Shorewood was not for sale, but that he would communicate the offer
to the Shorewood Board.

8
<PAGE> 10

Later on November 10, 1999, Mr. Johnson delivered the following letter to
Mr. Shore:

November 10, 1999

Strictly Confidential

Mr. Marc P. Shore
Chairman of the Board & Chief Executive Officer
Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172

Dear Marc:

This letter follows our meeting today to discuss your letter, dated October
26, 1999, in which you suggest a combination between Shorewood Packaging
Corporation and Chesapeake Corporation. Our Board of Directors, in consultation
with our management, legal, and financial advisors, has reviewed thoroughly your
expression of interest and related relevant considerations.

As I advised you today, our Board of Directors, after careful review, has
unanimously determined that the acquisition of Chesapeake by Shorewood, as set
forth in your letter, is not in the best interests of Chesapeake and its
stockholders and has charged me with firmly and unambiguously rejecting your
proposal. Our Board of Directors' firm conviction is that the interests of
Chesapeake and its stockholders are best served by continuing to pursue
vigorously our current strategic plan as an independent company.

While we believe that your proposal is not in the best interests of our
stockholders, our analysis suggests that a combination of our businesses through
an acquisition of Shorewood by Chesapeake would be in the best interests of our
respective stockholders, employees, and customers. Towards that end,
Chesapeake's Board of Directors has unanimously authorized me to propose that
Chesapeake acquire Shorewood at $16.50 in cash per share, representing nearly a
40% premium over Shorewood's closing price yesterday. The transaction we propose
can be effected by Chesapeake immediately with its cash on hand and committed
credit facilities, and is, therefore, not subject to a financing condition.

Chesapeake has been evaluating a possible acquisition of Shorewood since
early 1998, as part of our ongoing strategy of building a global specialty
packaging and merchandising company. We believe that the combination of
Chesapeake and Shorewood would create one of the world's premier specialty
packaging and merchandising companies, enhancing Chesapeake's position as a
leader in this segment and benefitting our customers through one-stop-shopping
for complementary products.

We are prepared to commence immediately good faith negotiations on an
exclusive basis with the objective of entering into a definitive merger
agreement consistent with our proposal. To date, your letter to us has been kept
confidential, and we have reciprocally made our proposal to you on a
confidential basis. Should you choose to pursue this matter in the public forum,
be assured that we are prepared to pursue aggressively our own objectives.

We appreciate the obligation of your Board of Directors, which you
acknowledged today, to meet and consider our proposal from the standpoint of the
best interests of all of your stockholders. Of course, we were disappointed that
you stated today that such a meeting would be a very short one. Nevertheless, we
hope that your Board will give our proposal serious consideration.

9
<PAGE> 11

I look forward to your prompt response.

Sincerely,

/s/ Thomas H. Johnson
--------------------------------------
Thomas H. Johnson
President & Chief Executive Officer

On November 18, 1999, Mr. Shore delivered the following letter to Mr.
Johnson:

November 18, 1999

Mr. Thomas H. Johnson
President & Chief Executive Officer
Chesapeake Corporation
James Center II
1021 East Cary Street
Box 2350
Richmond, VA 23218

Dear Tom:

This is in response to the proposal you made at our meeting on November 10,
1999 and in the letter you delivered to me late the same day.

Our Board of Directors has given due consideration to your proposal and
concluded that it is inconsistent with Shorewood's clear and successfully
implemented strategic direction and not in the best interests of Shorewood's
stockholders. After consulting with our legal and financial advisors, our Board
has determined that our stockholders will benefit most if Shorewood continues to
position itself as the premier supplier of high end folding cartons to a
multinational customer base. Accordingly, I have been authorized to inform you
that the Shorewood Board of Directors has unanimously and unequivocally rejected
your proposal that we enter into negotiations for the acquisition of Shorewood
by Chesapeake.

Nevertheless, we continue to believe that an acquisition of Chesapeake by
Shorewood, at a fair price and a significant premium to Chesapeake's current
market value would be a step in the best interests of Chesapeake's stockholders,
management, employees and customers. Moreover, we believe that the price of $40
per share, which we have proposed, would be embraced by Chesapeake's
stockholders. That price would enable Chesapeake's stockholders to realize a
valuation nearly equivalent to their company's all time market high and more
than 30% above its current market value.

Tom, we want to enter into an amicable, albeit arm's length, negotiated
transaction with your company. Toward that end, we again propose that your Board
authorize you to enter into negotiations with us, so that your stockholders may
decide whether the proposal we have made is fair, reasonable and in their best
interests. We believe, without having had an opportunity to do any due diligence
other than with respect to publicly available documents, that $40 fully values
Chesapeake's stock. I trust you will reconsider your position and respond so
that we may further our mutual interests.

Alternatively, we are willing to let Chesapeake's stockholders decide if
our proposal is acceptable to them, whether or not your Board endorses the
proposal. Therefore, if you and your Board are unwilling to enter into
negotiations with us, we request that you remove the existing legal impediments
to a Shorewood tender offer so that your stockholders may decide for themselves
where their best interests lie.

As you know, Shorewood has a shareholding in Chesapeake which, based on
your most recent published information, is almost 5% of Chesapeake's outstanding
common stock. If you make continued progress in your share repurchase program,
Shorewood will become a 5% stockholder in your company, even if it does not

10
<PAGE> 12

increase its position. In any event, we believe it appropriate that Chesapeake's
stockholders be made aware of the opportunity that Shorewood is seeking to
provide and that they, as well as Shorewood's stockholders, be informed of your
response to our proposal. To accomplish that, we are issuing the enclosed press
release simultaneously with the delivery of this letter.

Cordially,

/s/ Marc P. Shore
--------------------------------------
Marc P. Shore
Chairman and Chief Executive Officer

Also on November 18, 1999, Shorewood issued the following press release:

CONTACTS:
Shorewood Packaging
Howard Liebman
President & Chief Financial Officer
(212) 371-1500

FOR IMMEDIATE RELEASE

Morgan-Walke Associates
Investors: Robert P. Jones/Stephanie
Prince
Media: Jennifer Kirksey
(212) 850-5600

SHOREWOOD PACKAGING CORPORATION PROPOSAL
TO CHESAPEAKE CORPORATION

NEW YORK, NY, November 18, 1999 -- Shorewood Packaging Corporation
(NYSE:SWD) announced that Chesapeake Corporation's (NYSE:CSK) Board of Directors
has rejected a proposal by Shorewood to enter into negotiations for the
acquisition of Chesapeake with cash consideration of $40 per share, a premium of
41% over the market price when the proposal was made, 33% over yesterday's
closing price and a valuation nearly equivalent to Chesapeake's all time market
high, reached in July 1998, well before it announced its current stock buy-back
program.

Shorewood stated that its proposal had been made to Chesapeake's Board of
Directors on October 26, 1999 and rejected by Chesapeake on November 10, 1999.
Chesapeake's rejection included a counterproposal that Chesapeake acquire
Shorewood for cash consideration of $16.50 a share, a price well below
Shorewood's trailing 12 month closing high.

Shorewood's Board of Directors has rejected the counterproposal as being
inconsistent with the company's strategic plan to position itself as the premier
supplier of high end folding cartons to a multinational customer base, as well
as failing to recognize Shorewood's value and the benefits that would be
provided to Chesapeake's customers, employees and stockholders if Shorewood were
to acquire Chesapeake.

Shorewood owned 809,000 Chesapeake shares or 4.62% of Chesapeake as of
October 29, 1999, the date of Chesapeake's most recent 10-Q. Shorewood noted
that Chesapeake's anti-takeover provisions have the practical effect of
disenfranchising Chesapeake's stockholders. For example, Chesapeake's "dead hand
poison pill" makes it difficult for Shorewood to present its proposal to
Chesapeake's stockholders without the prior approval of Chesapeake's Board of
Directors. Accordingly, Shorewood stated, although it is not currently
contemplating a tender offer to Chesapeake's stockholders without the prior
approval of Chesapeake's Board of Directors, it has requested Chesapeake's Board
to redeem the "poison pill". If the "poison pill" and other

11
<PAGE> 13

protective provisions were removed, Shorewood would move promptly to bring its
proposal directly to Chesapeake's stockholders. Additionally, together with its
financial and legal advisors, Shorewood is considering other alternatives that
would enable Chesapeake's stockholders to decide whether $40 a share is a fair
price.

Shorewood Packaging Corporation is a leading value-added provider of high
quality printing and paperboard packaging for the computer software, cosmetics
and toiletries, food, home video, music, tobacco and general consumer markets in
North America and China, with 16 plants in the United States, Canada and China.

Certain statements included in this press release constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are typically identified by
their inclusions of phrases such as "the Company anticipates," "the Company
believes" and other phrases of similar meaning. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others:
general economic and business conditions; competition; political changes in
international markets; raw material and other operating costs; costs of capital
equipment; changes in foreign currency exchange rates; changes in business
strategy or expansion plans; the results of continuing environmental compliance
testing and monitoring; quality of management; availability, terms and
development of capital; fluctuating interest rates and other factors referenced
in this release and in the Company's annual report on Form 10-K and quarterly
reports on Form 10-Q.

Also on November 18, 1999, Chesapeake issued the following press release:

FOR IMMEDIATE RELEASE

Chesapeake Confirms Proposal to Acquire Shorewood for $16.50 Per Share in
Cash

RICHMOND, Va., Nov. 18/PRNewswire/ -- Chesapeake Corporation (NYSE:
CSK -- news) today confirmed that it made a proposal to acquire Shorewood
Packaging Corporation (NYSE: SWD -- news) for $16.50 in cash per share, or in
the aggregate, approximately $480 million in equity plus approximately $260
million in debt. This represents nearly a 40% premium over Shorewood's closing
price on November 9, 1999, the day prior to Chesapeake's proposal. The
transaction can be effected by Chesapeake immediately with its cash on hand and
committed credit facilities, and is not subject to a financing condition.

Chesapeake noted that the company is prepared to commence immediate good
faith negotiations on an exclusive basis with the objective of entering into a
definitive merger agreement consistent with its proposal.

Thomas H. Johnson, president and chief executive officer of Chesapeake,
said, "Chesapeake has been evaluating a possible acquisition of Shorewood since
early 1998, as part of our ongoing strategy of building a global specialty
packaging and merchandising company. We believe Chesapeake's acquisition of
Shorewood would create, under Chesapeake's leadership, one of the world's
premier specialty packaging and merchandising companies, enhancing Chesapeake's
position as a leader in this segment and benefitting customers through one-stop
shopping for complementary products.

"We at Chesapeake are continuing to pursue our strategic plan of
redeploying our capital into appropriate acquisitions to further our growth and
enhance stockholder value. We are currently in discussions with several other
attractive acquisition candidates," Mr. Johnson continued.

"We believe that Shorewood's decision to make public its unsolicited
proposal is the latest in a series of ill-conceived actions by Shorewood
following Shorewood's unsuccessful attempt to acquire Field Group plc, which
Chesapeake acquired in March 1999," concluded Mr. Johnson.

Chesapeake noted that its board of directors, in consultation with its
financial advisors, Goldman, Sachs & Co. and Donaldson Lufkin & Jenrette, and
legal advisor, Hunton & Williams, carefully considered Shorewood's unsolicited
proposal and unanimously concluded that the proposal is inadequate and not in
the best interests of Chesapeake's stockholders.
12
<PAGE> 14

Chesapeake also noted that it has referred Shorewood's
heretofore-undisclosed accumulation of Chesapeake stock to the Federal Trade
Commission, requesting an investigation as to whether Shorewood has violated the
Hart-Scott-Rodino Antitrust Improvement Act.

Chesapeake Corporation, headquartered in Richmond, Va., is primarily
engaged in the manufacturing and sale of specialty packaging and
point-of-purchase displays. Chesapeake has over 40 locations in North America,
Europe and Asia. Chesapeake's net sales in 1998 were $950.4 million.
Chesapeake's website is http://www.cskcorp.com.

This news release, including comments by Thomas H. Johnson, contains
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The accuracy of such
statements is subject to a number of risks, uncertainties, and assumptions that
may cause Chesapeake's actual results to differ materially from those expressed
in the forward-looking statements including, but not limited to: competitive
products and pricing; production costs, particularly for raw materials such as
corrugated box and display materials; fluctuations in demand; government
policies and regulations affecting the environment; interest rates; currency
translation movements; Year 2000 compliance issues; and other risks that are
detailed from time to time in reports filed by the Company with the Securities
and Exchange Commission.

On November 22, 1999, Chesapeake issued the following press release, which
contained the full text of a letter which was sent on such date by Mr. Johnson
to each member of the Shorewood Board:

FOR IMMEDIATE RELEASE

CHESAPEAKE SENDS LETTER TO SHOREWOOD DIRECTORS
Indicates Willingness to Negotiate Price and Structure

(Richmond, VA -- November 22, 1999) Thomas H. Johnson, President and CEO of
Chesapeake Corporation (NYSE:CSK), today sent the following letter to each of
the directors of Shorewood Packaging Corporation (NYSE:SWD) regarding
Chesapeake's proposal to acquire Shorewood for $16.50 per share in cash:

November 22, 1999

The Board of Directors
Shorewood Packaging Corporation
277 Park Avenue
New York NY 10172

Ladies and Gentlemen:

We were disappointed to learn of your rejection of our fully-financed
proposal to acquire Shorewood at $16.50 per share, representing a substantial
premium to your current market price. We continue to believe that a combination
of our businesses under Chesapeake's leadership would be in the best interests
of our respective stockholders, employees and customers.

Your President, Mr. Liebman, was quoted in The Wall Street Journal as
saying that you are prepared to consider an offer at the "right price." While we
believe that our $16.50 proposal represents a full valuation, we wish to
reiterate that we are prepared to commence immediate good faith negotiations
regarding our proposal. Our offer is based on publicly available information,
and we remain open to the possibility that we may be able to increase our offer
with appropriate due diligence and access to your business plan. We also stand
ready to discuss alternatives to an all-cash structure that may offer a
tax-advantaged alternative for your stockholders.

Given the importance to your stockholders of our continued interest and our
willingness to negotiate price and structure, we are issuing a press release
today concerning the subject of this letter.

13
<PAGE> 15

We look forward to your prompt response, and to commencing good faith
negotiations regarding our proposal.

Sincerely,

/s/ Thomas H. Johnson
--------------------------------------
Thomas H. Johnson

Johnson commented that he hoped Shorewood's Board, upon receiving the
letter, would realize the promising opportunities that could be created through
a combination of the companies under Chesapeake's leadership. "Under our
proposal, the combined company would have a strong balance sheet with financial
and management capabilities to compete and grow globally. Chesapeake has a
proven track record as a global consolidator with successful integration of
acquired businesses."

Johnson continued, "Chesapeake Corporations's international strength is
important, because we believe that global consolidation to offer multinational
customers one-stop business solutions will drive our business in the next
century. Chesapeake has an experienced international management team in place to
operate a global packaging and merchandising company."

Johnson also cited Chesapeake's multiple leadership positions in specialty
packaging and merchandising. "Chesapeake is the largest North American producer
of temporary and permanent point-of-purchase displays, the North American leader
for colorful, litho-laminated packaging, a leading European folding carton,
leaflet and label supplier, and a local leader in specific U.S. markets for
customized, corrugated packaging. Our net sales for 1998 were $950.4 million and
our net sales for 1999's first three quarters, ending September 30, are $916.8
million. We are clearly in a strong position to make the combination of our two
businesses successful."

Chesapeake Corporation, headquartered in Richmond, Va., is primarily
engaged in the manufacturing and sale of a specialty packaging and
point-of-purchase displays. Chesapeake has over 40 locations in North America,
Europe and Asia. Chesapeake's net sales in 1998 were $950.4 million.
Chesapeake's website is www.cskcorp.com.

###

<TABLE>
<S> <C>
For media relations, call: For investor relations, call
Molly Remes William Tolley/Joel Mostrom
804-697-1110 804-697-1157/804-697-1147
</TABLE>

Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999

14
<PAGE> 16

On November 29, 1999, Shorewood issued the following press release:

SHOREWOOD PACKAGING CORPORATION ISSUES STATEMENT

NEW YORK, Nov. 29/PRNewswire/ -- Shorewood Packaging Corporation (NYSE:
SWD -- news) remains committed to its $40 per share cash proposal to acquire
Chesapeake. Given the unwillingness of Chesapeake's management and Board of
Directors to consider Shorewood's proposal, Shorewood is continuing to explore
options to enable Chesapeake's stockholders to consider the Shorewood proposal.
Shorewood's proposal of $40 per share is significantly above the consensus one
year price target for Chesapeake and also represents a 52-week high for the
company.

Shorewood reiterated that it is not for sale and believes Chesapeake's
actions to date are solely in response to the Shorewood premium cash proposal.
Shorewood also believes that Chesapeake's actions reflect a reckless disregard
for the best interests of their stockholders and do not reflect a careful
evaluation of Shorewood or its business. Shorewood noted that it views
Chesapeake's proposal to acquire Shorewood for $16.50 per share as grossly
inadequate. That price is considerably below Shorewood's 52-week high and vastly
below analysts' one-year price target for Shorewood, which range as high as $25
per share.

Finally, Shorewood noted that an institutional investor has agreed to sell
14.9% of Shorewood to Chesapeake for $17.25 per share. In a call to Shorewood,
that investor informed Shorewood that its required regulatory filing will
disclose that the institution, which invested in Shorewood at a low-cost basis,
retains 100% of the upside with respect to those shares in the event of a sale
to Chesapeake at a higher price. Given the terms of this arrangement, Shorewood
does not believe the price to be paid by Chesapeake reflects fair value for
Shorewood, and believes its own $40 per share offer for Chesapeake to represent
superior value.

Certain statements included in this press release constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are typically identified by
their inclusion of phrases such as "the Company anticipates," "the Company
believes" and other phrases of similar meaning. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others:
general economic and business conditions; competition; political changes in
international markets; raw material and other operating costs; costs of capital
equipment; changes in foreign currency exchange rates; changes in business
strategy or expansion plans; the results of continuing environmental compliance
testing and monitoring; quality of management; availability, terms and
development of capital; fluctuating interest rates and other factors referenced
in this release and in the Company's annual report on Form 10-K and quarterly
reports on Form 10-Q.

In addition, on November 29, 1999, Chesapeake issued the following press
release:

FOR IMMEDIATE RELEASE

CHESAPEAKE CORPORATION AGREES TO ACQUIRE 14.9% OF
SHOREWOOD PACKAGING SHARES

(Richmond, VA -- November 29, 1999) Chesapeake Corporation (NYSE:CSK) today
announced that it has agreed to purchase approximately 4.1 million shares, or
14.9%, of Shorewood Packaging Corporation's (NYSE:SWD) outstanding common stock
from an institutional investor at a price of $17.25 per share.

Chesapeake previously announced that it has made a fully financed proposal
to Shorewood's directors to purchase Shorewood's shares at $16.50 per share,
nearly a 40% premium over Shorewood's closing price on November 9, 1999, the day
before Chesapeake's proposal was presented to Shorewood.
15
<PAGE> 17

Thomas H. Johnson, president and chief executive officer of Chesapeake,
said, "We are pleased with this agreement, which validates our view that
Chesapeake's acquisition of Shorewood makes great sense for Shorewood's
stockholders. We believe Chesapeake's acquisition of Shorewood would create,
under Chesapeake's leadership, one of the world's premier specialty packaging
and merchandising companies, enhancing Chesapeake's position as a leader in this
segment and benefitting customers through one-stop shopping for complementary
products.

"Chesapeake has a strong balance sheet with the management and financial
capabilities to compete and grow globally. Chesapeake also has a proven track
record as a global consolidator with successful integration of acquired
businesses. We renew our offer to Shorewood's directors to meet and negotiate
the terms of an acquisition of Shorewood by Chesapeake."

Closing of the purchase of the Shorewood shares is subject to completion of
review of the transaction under the Hart-Scott-Rodino Antitrust Improvements
Act. Chesapeake will commence the time period of review by a filing to be made
today. Additional information will be set forth in a Schedule 13D expected to be
filed with the Securities and Exchange Commission today. Information in this
release is qualified by reference to the information to be included in the
Schedule 13D.

Chesapeake is the largest North American producer of temporary and
permanent point-of-purchase displays, the North American leader for colorful,
litho-laminated packaging, the premiere European folding carton, leaflet and
label supplier, and a local leader in specific U.S. markets for customized,
corrugated packaging.

Chesapeake Corporation, headquartered in Richmond, Va., is primarily
engaged in the manufacturing and sale of specialty packaging and merchandising
services. Chesapeake has over 40 locations in North America, Europe and Asia.
Chesapeake's net sales in 1998 were $950.4 million. Chesapeake's website is
http://www.cskcorp.com.

# # #

<TABLE>
<S> <C>
For media relations, call: For investor relations, call
Molly Remes William Tolley/Joel Mostrom
804-697-1110 804-697-1157/804-697-1147
</TABLE>

Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999

On November 30, 1999, Chesapeake filed a Schedule 13D with the SEC
disclosing that, on November 26, 1999, Chesapeake had entered into a stock
purchase agreement (the "Purchase Agreement") to purchase 4,106,440 Shares (the
"Purchased Shares"), or approximately 14.9% of the outstanding Shares, from the
clients of Ariel Capital Management, Inc. ("Ariel") for $17.25 per Share. In the
Purchase Agreement, Ariel also agreed that, if Chesapeake commenced a public
tender offer for the Shares at a price that equaled or exceeded $17.25 per
Share, then Ariel would use its best efforts as investment adviser to exercise
its discretionary authority to cause its clients to (i) tender the Purchased
Shares in such tender offer and (ii) execute proxies or written consents in the
form solicited by Chesapeake or any of its affiliates in any proxy or written
consent solicitation commenced in connection with such tender offer.

16
<PAGE> 18

On December 3, 1999, Chesapeake commenced the Chesapeake Offer and filed a
preliminary Consent Solicitation Statement with the SEC in connection with its
intended solicitation of consents from the stockholders of Shorewood.

In addition, on December 3, 1999, Chesapeake and Sheffield filed a lawsuit
in the Court of Chancery of the State of Delaware against Shorewood and each
member of the Shorewood Board, and filed a separate lawsuit against Shorewood in
the United States District Court for the District of Delaware. See Item 8
"Litigation."

On December 9, 1999, the Shorewood Board held a special meeting at which
the Shorewood Board reviewed with Shorewood's management, Bear, Stearns & Co.
Inc. ("Bear Stearns") and Jefferson Capital, Shorewood's financial advisors, and
Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps") and Bryan Cave, LLP
("Bryan Cave"), Shorewood's legal advisors, the Chesapeake Offer and its terms
and conditions and the related consent solicitation. In addition, the Shorewood
Board received an oral presentation from Bear Stearns regarding its preliminary
analysis relating to the Chesapeake Offer.

On December 13, 1999, Shorewood filed a preliminary Consent Revocation
Statement with the SEC in connection with its intended solicitation of consent
revocations from the stockholders of Shorewood.

On December 15, 1999, the Shorewood Board held a special meeting at which
the Shorewood Board again reviewed the Chesapeake Offer and its terms and
conditions with Shorewood's management and its legal and financial advisors. At
such meeting, Bear Stearns presented its financial analysis of the Chesapeake
Offer. In addition, Bear Stearns provided an oral opinion (which was
subsequently confirmed in writing) to the effect that, as of December 15, 1999,
the consideration offered in the Chesapeake Offer was inadequate from a
financial point of view to Shorewood's stockholders (other than Chesapeake and
its affiliates). The Shorewood Board was also informed by management that a
number of parties had expressed an interest in pursuing an extraordinary
transaction involving Shorewood and that Shorewood had entered into preliminary
discussions with a number of parties. After lengthy discussions and
presentations from Bear Stearns, Skadden Arps and Shorewood's senior management,
the Shorewood Board unanimously concluded that, given the values inherent in
Shorewood's businesses and Shorewood's prospects, the Chesapeake Offer is
inadequate and not in the best interests of Shorewood and its stockholders and
recommended that Shorewood's stockholders reject the Chesapeake Offer and not
tender their Shares pursuant to the Chesapeake Offer. A copy of a letter to
stockholders communicating the Shorewood Board's recommendation and a form of
press release announcing such recommendation are filed as Exhibits 1 and 3
hereto, respectively, and are incorporated herein by reference. Also at the
meeting of the Shorewood Board held on December 15, 1999, the Shorewood Board
established a Special Strategic Committee of Independent Directors (consisting
of Kevin J. Bannon, Virginia A. Kamsky and William P. Weidner) for the purpose
of reviewing strategic alternatives which may develop and making recommendations
thereon to the Shorewood Board.

In addition, on December 15, 1999, Mr. Johnson delivered the following
letter to Mr. Shore:

December 15, 1999

Mr. Marc Shore
Chairman and Chief Executive Officer
Shorewood Packaging Corporation
277 Park Avenue
New York NY 10172

Dear Marc:

As you may know, Chesapeake today announced a recommended cash tender offer
to acquire Boxmore International p1c, headquartered in Belfast, Northern
Ireland. Boxmore's board of directors has unanimously recommended Chesapeake's
offer to Boxmore's shareholders. Like Shorewood, this is a company we have been
evaluating for some time. We are delighted with the enhancement of our global
platform that this company

17
<PAGE> 19

offers and believe the acquisition of Boxmore enhances the strategic rationale
for our acquisition of Shorewood.

At the same time, we want to reinforce our commitment to our $17.25 cash
tender offer for Shorewood. We want you and your board to know that we have in
place a fully committed credit facility from First Union National Bank that
permits us to complete the acquisitions of both Boxmore and Shorewood on the
terms of our offers. Accordingly, neither offer is subject to any financing
conditions

We reiterate our offer to meet with the Shorewood board to negotiate the
terms, including price and structure, of an acquisition of Shorewood by
Chesapeake. In this regard, we are ready to meet with you and your advisors at
your earliest convenience

Sincerely,

/s/ Thomas H. Johnson
Thomas H. Johnson

On December 16, 1999, Shorewood issued the following press release:

FOR IMMEDIATE RELEASE:

CONTACTS:

Sard Verbinnen & Co.
David Reno/Paul Caminiti
(212) 687-8080

SHOREWOOD BOARD REJECTS CHESAPEAKE'S OFFER AS INADEQUATE

Files Counterclaims Alleging Chesapeake Is "Interested Stockholder";
Could Jeopardize Its Financing If Merger Not Possible For Three Years

NEW YORK, December 16, 1999 -- Shorewood Packaging Corporation (NYSE: SWD)
announced today that its Board of Directors voted unanimously to recommend that
stockholders reject the unsolicited $17.25 per share tender offer by Chesapeake
Corporation (NYSE: CSK) and not tender any of their shares pursuant to the
offer.

In recommending that stockholders reject Chesapeake's offer, Shorewood's
Board cited the following:

-- the Board's view that the Chesapeake offer is inadequate and does
not reflect the inherent value of Shorewood as a leading
value-added provider of high quality printing and paperboard
packaging products for the music, computer software, cosmetics and
toiletries, food, home video, tobacco, and general consumer markets
in North America.

-- the written opinion of Bear, Stearns & Co. Inc., Shorewood's
financial advisor, that Chesapeake's offer price is inadequate from
a financial point of view to Shorewood's stockholders (other than
Chesapeake and its affiliates).

-- the opportunistic timing of Chesapeake's offer, which seeks to
exploit Shorewood's recent stock price in relation to historic
trading patterns.

-- that Chesapeake's offer price represents a 15% to 20% discount to
the one year target prices for Shorewood's stock (without taking
into account any extraordinary transaction) which have been
announced by several major Wall Street brokerage firms that cover
Shorewood.

-- the significant uncertainties and contingencies associated with
Chesapeake's offer, including the numerous conditions to
Chesapeake's financing and the Board's belief that one or more of
these conditions cannot be satisfied.

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-- the significant uncertainties associated with the second-step
merger proposed by Chesapeake, including uncertainty as to the
permissibility of such merger within three years under Section 203
of the Delaware corporate law.

-- the Board's belief that Chesapeake's offer represents an attempt by
Chesapeake to usurp for itself the future growth in revenues, net
income and cash flow and stock price appreciation that are only
beginning to result from Shorewood's recent capital expenditures
and other initiatives aimed at making Shorewood the premier global
supplier of value-added packaging.

-- the Board's view that based on, among other things, the preliminary
discussions Shorewood has had with certain unsolicited third
parties, Shorewood has a variety of strategic alternatives
available to it to enhance stockholder value.

Marc P. Shore, Chairman and Chief Executive Officer, stated, "Chesapeake's
hostile offer is clearly inadequate. It represents a significant discount to our
52-week high, does not accurately reflect the Company's growth prospects and may
not be capable of being completed. Shorewood is a strong and growing company
with a proven track record and an exciting future."

Shore added, "The Board is fully committed to enhancing value for Shorewood
stockholders and has authorized management and its advisors to explore the
various strategic alternatives available to us. We look forward to completing
that process."

Shorewood also announced today that it is filing counterclaims in the
lawsuits brought by Chesapeake in Delaware state and federal court. The
counterclaims allege, among other things, that when Chesapeake agreed on
November 26 to purchase 14.9% of Shorewood's outstanding shares from an
institutional holder that held over 20% of the outstanding shares, the
institutional holder agreed to vote the remaining shares in favor of
Chesapeake's consent solicitation. The counterclaims also allege that other
provisions of the purchase agreement amount to an arrangement and understanding
between the institutional holder and Chesapeake with respect to the entire 20%
block. The effect of this arrangement is to make Chesapeake an "interested
stockholder" under Section 203 of the Delaware corporate law, thereby
proscribing Chesapeake's ability to consummate a merger for three years without
the two-thirds vote of the outstanding shares not owned by Chesapeake. The
Chancery Court counterclaim seeks a declaratory judgment that Chesapeake is an
"interested stockholder". The Federal counterclaim alleges that Chesapeake's
tender offer materials do not disclose the full beneficial ownership and that
Chesapeake has misstated and concealed the fact that its financing is subject to
numerous conditions, one or more of which cannot be satisfied.

Additional information with respect to the Board's decision to recommend
that stockholders reject Chesapeake's offer and the matters considered by the
Board in reaching such decision is contained in Shorewood's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being filed
today with the Securities and Exchange Commission and will be mailed to
stockholders shortly.

* * *

Certain statements included in this press release constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are typically identified by
their inclusion of phrases such as "Shorewood anticipates," "Shorewood
believes"' and other phrases of similar meaning. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of Shorewood to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others:
general economic and business conditions; competition; political changes in
international markets; raw material and other operating costs; costs of capital
equipment; changes in foreign currency exchange rates; changes in business
strategy or expansion plans; the results of
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<PAGE> 21

continuing environmental compliance testing and monitoring; quality of
management; availability, terms and development of capital; fluctuating interest
rates and other factors referenced in this release and in Shorewood's annual
report on Form 10-K and quarterly reports on Form 10-Q.

THIS PRESS RELEASE DOES NOT CONSTITUTE A SOLICITATION TO REVOKE CONSENTS IN
CONNECTION WITH THE CONSENT SOLICITATION OF CHESAPEAKE CORPORATION. ANY SUCH
SOLICITATION WILL BE MADE ONLY BY MEANS OF SEPARATE CONSENT SOLICITATION
MATERIALS COMPLYING THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.

CERTAIN INFORMATION CONCERNING PARTICIPANTS

Shorewood Packaging Corporation ("Shorewood") and certain other persons
named below may be deemed to be participants in the solicitation of revocations
of consents in response to the consent solicitation being conducted by
Chesapeake Corporation ("Chesapeake"). The participants in this solicitation may
include: (i) the directors of Shorewood (Marc P. Shore (Chairman of the Board
and Chief Executive Officer), Howard M. Liebman (President and Chief Financial
Officer), Leonard Verebay (Executive Vice President), Andrew N. Shore (Vice
President and General Counsel), Kevin J. Bannon, Sharon R. Fairley, Virginia A.
Kamsky, R. Timothy O'Donnell and William P. Weidner; and (ii) William H. Hogan
(Senior Vice President, Finance and Corporate Controller). As of the date of
this communication, the number of shares of common stock, par value $0.01 per
share ("Common Stock"), beneficially owned by the Shorewood participants
(including shares subject to stock options exercisable within 60 days) is as
follows: Marc P. Shore (4,750,485), Howard M. Liebman (233,269), Leonard J.
Verebay (500,180), Andrew N. Shore (169,052), Kevin J. Bannon (33,000), Virginia
A. Kamsky (4,500), R. Timothy O'Donnell (326,118); William P. Weidner (57,000);
and William H. Hogan (30,500 shares).

Shorewood has retained Bear, Stearns & Co. Inc. ("Bear Stearns") and
Jefferson Capital Group, Ltd. ("Jefferson Capital") to act as its co-financial
advisors in connection with the tender offer (the "Offer") by Chesapeake and its
wholly owned subsidiary, Sheffield, Inc., to purchase shares of Common Stock for
$17.25 per share net to the seller in cash, for which Bear Stearns and Jefferson
Capital may receive substantial fees, as well as reimbursement of reasonable
out-of-pocket expenses. In addition, Shorewood has agreed to indemnify Bear
Stearns, Jefferson Capital and certain related persons against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of their engagement. Neither Bear Stearns nor Jefferson Capital
admit that they or any of their partners, directors, officers, employees,
affiliates or controlling persons, if any, is a "participant" as defined in
Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended,
in the solicitation of consent revocations, or that Schedule 14A requires the
disclosure of certain information concerning Bear Stearns and Jefferson Capital,
respectively

In connection with Bear Stearns' role as co-financial advisor to Shorewood,
Bear Stearns and the following investment banking employees of Bear Stearns may
communicate in person, by telephone or otherwise with a limited number of
institutions, brokers or other persons who are stockholders of Shorewood and may
solicit consent revocations therefrom: Terence Cryan (Senior Managing Director),
Charles Edelman (Senior Managing Director), Mark A. Van Lith (Managing Director)
and Karen Duffy (Vice President). Bear Stearns engages in a full range of
investment banking, securities trading, market-making and brokerage services for
institutional and individual clients. In the normal course of its business Bear
Stearns may trade securities of Shorewood for its own account and the accounts
of its customers, and accordingly, may at any time hold a long or short position
in such securities. Bear Stearns has informed Shorewood that, as of the date
hereof, Bear Stearns held no shares of Common Stock for its own account. Bear
Stearns and certain of its affiliates may have voting and dispositive power with
respect to certain shares of Common Stock held in asset management, brokerage
and other accounts. Bear Stearns and such affiliates disclaim beneficial
ownership of such shares of Common Stock.

In connection with Jefferson Capital's role as co-financial advisor to
Shorewood, Jefferson Capital and the following investment banking employees of
Jefferson Capital may communicate in person, by telephone or otherwise with a
limited number of institutions, brokers or other persons who are stockholders of
Shorewood and may solicit consent revocations therefrom: R. Timothy O'Donnell
(President) and Louis W. Moelchert (Vice President). R. Timothy O'Donnell is the
beneficial owner of 276,118 shares of Common Stock. Louis W. Moelchert is the
beneficial owner of 1,500 shares of Common Stock. Jefferson Capital has informed
Shorewood that, as of the date hereof, it held 22,231 shares of Common Stock in
its investment account.

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ACCORDINGLY, THE SHOREWOOD BOARD UNANIMOUSLY RECOMMENDS THAT SHOREWOOD'S
STOCKHOLDERS REJECT THE CHESAPEAKE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO
THE CHESAPEAKE OFFER.

FACTORS CONSIDERED

In reaching the conclusions stated above, the Shorewood Board took into
account a variety of factors, including, but not limited to, the following:

1. The presentations by Bear Stearns and Jefferson Capital at the
meeting of the Shorewood Board held on December 15, 1999 concerning
Shorewood and the financial aspects of the Chesapeake Offer and the written
opinion of Bear Stearns, dated December 15, 1999, to the effect that, as of
such date and based upon and subject to certain matters stated in such
opinion, the consideration of $17.25 per Share being offered to the
stockholders of Shorewood pursuant to the Chesapeake Offer is inadequate
from a financial point of view to such stockholders (other than Chesapeake
and its affiliates). The full text of the written opinion dated December
15, 1999 of Bear Stearns is attached hereto as Exhibit 2, and is
incorporated herein by reference. Holders of Shares are urged to read such
opinion carefully in its entirety.

2. The business, financial condition, results of operations, current
business strategy and future prospects of Shorewood and whether the
Chesapeake Offer was reflective thereof, including the following:

- Shorewood's reputation as a leading value-added provider of high
quality printing and paperboard packaging products for the music,
computer software, cosmetics and toiletries, food, home video,
tobacco, and general consumer markets in North America.

- Shorewood's position in the packaging industry as a technological
leader and innovator.

- Shorewood's status as one of the largest manufacturers of printed
packaging for the entertainment and multimedia markets in North
America.

- Shorewood's strong relationships with key worldwide customers.

- The strength of Shorewood's management team.

- Shorewood's successful track record of integrating acquisitions.

- Shorewood's potential to grow its earnings through international as
well as domestic expansion.

- That Shorewood has not yet realized the benefits of the substantial
capital expenditures it has made to position itself for future
growth, including new facilities in North America and Asia. Those
benefits include Shorewood's ability to continue leveraging its
state-of-the-art technology. Such technology, among other things,
has resulted, during Shorewood's second fiscal quarter, in a 230
basis point increase in Shorewood's gross profit margin to 26.5%,
compared to the same quarter last year and, during the six month
period ended October 30, 1999, in a 230 basis point increase in
Shorewood's gross profit margin to 26%, compared to the same period
last year.

- Shorewood's reported results for its second fiscal quarter ended
October 30, 1999, including revenues of $165.3 million (which
represented an increase of 14% above the $145.4 million reported
for the same period last year), operating income of $21.9 million
(which represented

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<PAGE> 23

a 17% increase over the $18.8 million reported for the same period
last year), earnings before interest, taxes, depreciation and
amortization (EBITDA) of $29.1 million (which represented a 20%
increase over the $24.2 million reported for the same period last
year), earnings (before an extraordinary item and the cumulative
effect of a change in accounting principle) of $11.6 million (which
represented a 17% increase over the $9.9 million in the comparable
period last year), and earnings per diluted share of $0.42 (which
represented a 14% increase over the $0.37 per diluted share
reported for the same period last year).

- Shorewood's reported results for the six months ended October 30,
1999, including net sales of $309.0 million (which represented an
increase of 19% above the $260.7 million reported for the same
period last year), operating income of $36.1 million (which
represented a 14% increase over the $31.6 million reported for the
same period last year), earnings before interest, taxes,
depreciation and amortization (EBITDA) of $50.3 million (which
represented a 20% increase over the $41.8 million reported for the
same period last year), earnings (before an extraordinary item and
the cumulative effect of a change in accounting principle) of $19.3
million (which represented a 16% increase over the $16.7 million
reported the same period last year), and earnings per diluted share
of $0.69 (which represented an 11% increase over the $0.62 per
diluted share reported for the same period last year).

- Shorewood's historic five-year compounded annual revenue growth
rate of 21.13% (through fiscal year 1999).

- Shorewood's historic five-year compounded annual growth rate of 24%
for its earnings per diluted share (through fiscal year 1999),
excluding the after-tax gain associated with the sale of a minority
interest in Shorewood's China facility.

- Shorewood's record during the past five years of increasing its net
income from continuing operations at a compounded annual growth
rate of 25% (through fiscal year 1999), excluding the after-tax
gain associated with the sale of a minority interest in Shorewood's
China facility.

3. The opportunistic timing of the Chesapeake Offer, which seeks to
exploit Shorewood's recent stock price in relation to historic trading
patterns. In this regard, the Shorewood Board noted the following:

- The Shorewood Board's belief that the trading price for the Shares
immediately prior to the announcement on November 18, 1999 that
Chesapeake had made a proposal to acquire Shorewood did not reflect
the long-term value inherent in Shorewood.

- The historical trading prices of the Shares and the fact that the
Offer Price represents a 16.4% discount from the Shares' 52-week
high of $20.625.

- That the Offer Price represents a 15% to 20% discount to the target
prices for the Shares which have been announced by several major
Wall Street brokerage firms that have analysts which cover
Shorewood.

- That the price-earnings multiple of 14.0 implied by the Offer Price
represents a discount to Shorewood's average price-earnings
multiple over the eight fiscal quarters ended July 30, 1999 of
15.8.

4. The significant uncertainties and contingencies associated with the
Chesapeake Offer, including conditions which (i) are in the sole discretion
of Chesapeake, (ii) are subject to external events not directly related to
Shorewood or (iii) are not within the control of Shorewood or Chesapeake.
In this regard, the Shorewood Board noted the following:

- According to its Offer to Purchase, Chesapeake had only $36 million
in cash and cash equivalents and only $139.5 million in working
capital as of September 30, 1999. However, Chesapeake has estimated
therein that the total amount of funds required to purchase all of

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<PAGE> 24

the outstanding Shares (other than those owned by Sheffield) on a
fully diluted basis pursuant to the Chesapeake Offer and the
Proposed Chesapeake Merger and to pay all related fees and expenses
will be approximately $525 million.

- Accordingly, based upon its Offer to Purchase, Chesapeake does not
have the funds to pay for the Shares it has offered to purchase
pursuant to the Chesapeake Offer and the Proposed Chesapeake Merger
in the absence of financing from third parties.

- However, Chesapeake's financing is subject to numerous conditions,
many of which are in addition to the conditions to the Chesapeake
Offer and one or more of which are not, in the view of the
Shorewood Board, capable of being satisfied. It is therefore
possible that Chesapeake could accept Shares for payment pursuant
to the Chesapeake Offer and not have the funds available to pay for
such Shares.

5. The significant uncertainties associated with the Proposed
Chesapeake Merger, including uncertainty as to the completion and timing of
the Proposed Chesapeake Merger. In this regard, the Shorewood Board noted
the following:

- Chesapeake has reserved the right to waive the condition to the
Chesapeake Offer that, prior to the expiration date of the
Chesapeake Offer, there be validly tendered and not withdrawn at
least that number of Shares that, together with the Shares
beneficially owned by Chesapeake and its subsidiaries, including
Sheffield, would represent a majority of all outstanding Shares on
a fully diluted basis on the date of purchase (the "Minimum Tender
Condition"). By reserving the right to waive the Minimum Tender
Condition, Chesapeake has called into question its commitment to
consummating the Proposed Chesapeake Merger since it will not be
able to ensure consummation of the Proposed Chesapeake Merger if
the Minimum Tender Condition is not satisfied.

- The Shorewood Board has authorized the filing of counterclaims in
the Delaware lawsuits brought by Chesapeake based upon Chesapeake's
purchase of 14.9% of the outstanding Shares from an institutional
stockholder and the agreement relating thereto. The counterclaims
assert that as a result of such purchase and the arrangements and
understandings relating thereto, Chesapeake has acquired beneficial
ownership of more than 20% of the outstanding Shares and,
accordingly, is an "interested stockholder" pursuant to Section 203
of the DGCL. As an "interested stockholder" which did not receive
the approval of the Shorewood Board prior to entering into such
agreement, Chesapeake would be precluded from consummating the
Proposed Chesapeake Merger for three years unless approved by the
Shorewood Board and authorized by the vote of two-thirds of the
outstanding shares which are not owned by the "interested
stockholder." See Item 8 for additional information concerning
Section 203 and for a more detailed description of the
counterclaims. The Shorewood Board specifically took into account
the terms and conditions of the proposed bank financing of
Chesapeake and noted the uncertainty concerning Chesapeake's
ability to obtain financing if Chesapeake is determined to be an
"interested stockholder."

6. The Shorewood Board's belief that the Chesapeake Offer is an
attempt by Chesapeake to usurp for itself the future growth in revenues,
net income and cash flow and stock price appreciation that are only
beginning to result from Shorewood's recent initiatives aimed at making
Shorewood the premier global supplier of value-added packaging. In this
regard, the Shorewood Board noted the following completed and pending
initiatives:

- The acquisition in October 1998 of Queens Group, Inc. (the "Queens
Transaction"), a leading manufacturer of high quality, value-added
packaging for the music, multimedia and consumer products
industries, which acquisition has brought Shorewood a roster of new
customers and five additional facilities in the United States.

- The opening of Shorewood's 125,000 square foot plant in Guangzhou,
China which is expected to accelerate Shorewood's international
growth.
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- The discontinuation of manufacturing at Shorewood's Stanley, North
Carolina facility which will result in an annual cost savings of $3
million. This action was consistent with Shorewood's strategy of
streamlining operations to improve efficiencies and maximize
profitability.

- The entering into a strategic alliance with Westvaco Corporation
("Westvaco"), one of the largest and most highly regarded companies
in the paper industry, by selling them a 45% interest in
Shorewood's Guangzhou, China plant for $22.7 million, which
included a $5 million premium to Shorewood's cost. The proceeds
from this transaction were used to pay down debt. By partnering
with Westvaco, Shorewood was able to reduce the risk of its
investment in China and gains access to Westvaco's extensive
knowledge and experience of the China market. For two decades,
Westvaco has been doing business in China exporting paper,
paperboard and specialty chemicals to customers in China.

- The entering into a letter of intent to acquire 51%, with an option
to acquire the remaining 49%, of CD Cartondruck and its affiliates.
CD Cartondruck, a well-known specialist in the manufacture of high
quality value-added folding cartons for the international fragrance
and cosmetics markets located in Germany, is expected to represent
a formidable platform for Shorewood's future growth within the
European marketplace.

- Shorewood's ongoing review of other opportunities for expansion in
Europe and South America.

7. The Shorewood Board's belief that it is in the best interests of
Shorewood and its stockholders for Shorewood to review, together with its
financial advisors, the alternatives available to it for enhancing
stockholder value. In this regard, the Shorewood Board noted the following:

- The fact that since the public announcement on November 18, 1999 of
Chesapeake's interest in acquiring Shorewood, Shorewood has
received several unsolicited inquiries from third parties who have
expressed a potential interest in pursuing a transaction with
Shorewood.

- The fact that Shorewood has entered into confidentiality agreements
with, and/or supplied confidential information to, certain third
parties and, in that connection, has engaged in preliminary
discussions concerning their interest in pursuing an extraordinary
transaction involving Shorewood (see Item 7 below).

- That, based upon the preliminary discussions that Shorewood has had
with third parties, there exist parties interested in pursuing a
transaction with Shorewood to enhance stockholder value.

8. Shorewood's continuing interest in acquiring Chesapeake and the
Shorewood Board's view that the interests of Shorewood and its stockholders
would be better served by an acquisition of Chesapeake by Shorewood than an
acquisition of Shorewood by Chesapeake.

9. The Shorewood Board's belief, based in part on the factors referred
to in paragraphs (1) through (8) above, that the interests of Shorewood and
its stockholders would best be served by Shorewood exploring strategic
alternatives available to it for enhancing stockholder value.

In light of the above factors the Shorewood Board determined that the
Chesapeake Offer is not in the best interests of Shorewood and Shorewood's
stockholders.

The foregoing discussion of the information and factors considered by the
Shorewood Board is not intended to be exhaustive but addresses all of the
material information and factors considered by the Shorewood Board in its
consideration of the Chesapeake Offer. In view of the variety of factors and the
amount of information considered, the Shorewood Board did not find it
practicable to provide specific assessments of, quantify or otherwise assign any
relative weights to the specific factors considered in determining to recommend
that stockholders reject the Chesapeake Offer. Such determination was made after
consideration of all the factors taken as a whole. In addition, individual
members of the Shorewood Board may

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<PAGE> 26

have given differing weights to different factors. Throughout its deliberations,
the Shorewood Board received the advice of Bear Stearns, Jefferson Capital,
Skadden Arps and Bryan Cave who were retained to advise the Shorewood Board in
connection with the Chesapeake Offer.

ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

Bear Stearns was retained pursuant to the terms of a letter agreement dated
as of December 2, 1999 (the "Bear Stearns Letter Agreement") and Jefferson
Capital was retained pursuant to the terms of a letter agreement dated as of
December 14, 1999 (the "Jefferson Capital Letter Agreement II"), in each case,
to serve as Shorewood's co-financial advisor with respect to the Chesapeake
Offer.

Pursuant to the Bear Stearns Letter Agreement, Shorewood has agreed to pay
Bear Stearns the following compensation:

(a) if Bear Stearns renders any opinion relating to any proposed
"acquisition transaction" or "restructuring" (as such terms are defined
below), a fee of $750,000 for the first such opinion, $500,000 for the
second such opinion and $250,000 for each additional opinion up to a
maximum total of $1,500,000;

(b) if Shorewood has not terminated Bear Stearns' engagement under the
Bear Stearns Letter Agreement prior to February 28, 2000, a fee equal to
$2,500,000 minus any fees paid pursuant to clause (a) above and minus the
aggregate retainer fees (up to a maximum of $500,000) paid to Bear Stearns
under the December 1, 1999 engagement letter pursuant to which Bear Stearns
is acting as financial advisor to Shorewood in connection with its proposed
acquisition of Chesapeake (the "December 1 Retainer Fee");

(c) if an acquisition transaction is consummated involving the sale of
less than 50% of Shorewood's capital stock, a fee of $1,500,000;

(d) if an acquisition transaction (other than the sale of less than
50% of Shorewood's capital stock) is consummated, a fee equal to 0.66% of
Shorewood's total enterprise value (against which fee there will be
credited (i) any fees paid to Bear Stearns pursuant to clauses (a), (b) and
(c) above and (ii) the December 1 Retainer Fee); and

(e) if a restructuring is consummated, a fee to be mutually agreed
upon by Shorewood and Bear Stearns.

The foregoing fees will be payable upon the occurrence, during the term of
the Bear Stearns Letter Agreement or within one year of its termination, of any
event specified above, or upon the occurrence of any event specified above with
respect to which an agreement was executed by Shorewood during the term of the
Bear Stearns Letter Agreement or within one year of its termination.

The term "acquisition transaction" in the Bear Stearns Letter Agreement
means: (i) any merger, consolidation, reorganization, recapitalization, business
combination or other transaction pursuant to which Shorewood is acquired by, or
combined with, any person, group, corporation, partnership or other entity, or
(ii) the acquisition, directly or indirectly, by any acquiror of (A) any of
Shorewood's assets or operations or (B) any outstanding or newly issued shares
of Shorewood's capital stock (or securities convertible into or options or other
rights to acquire such capital stock). The term "restructuring" in the Bear
Stearns Letter Agreement includes (x) any extraordinary dividend or distribution
paid by Shorewood to its stockholders, (y) a purchase by Shorewood of 25% or
more of its Common Stock, and (z) a sale or spin-off of all or substantially all
of the assets of, or 25% or more of the capital stock of, any subsidiary or
division of Shorewood.

Under the Bear Stearns Letter Agreement, Shorewood has also agreed to
reimburse Bear Stearns for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel and other consultants and advisors)
and to indemnify Bear Stearns and certain related parties against certain
liabilities, including liabilities under the federal securities laws, relating
to or arising out of Bear Stearns' engagement.

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Pursuant to the Jefferson Capital Letter Agreement II, Shorewood has agreed
to pay Jefferson Capital the following compensation:

(a) if an acquisition transaction is consummated involving the sale of
less than 50% of Shorewood's capital stock, a fee of $546,000; and

(b) if an acquisition transaction (other than the sale of less than
50% of Shorewood's capital stock) is consummated, a fee equal to 0.24% of
Shorewood's total enterprise value.

The foregoing fees will be payable upon the occurrence, during the term of
the Jefferson Capital Letter Agreement II or within one year of its termination,
of any event specified above, or upon the occurrence of any event specified
above with respect to which an agreement was executed by Shorewood during the
term of the Jefferson Capital Letter Agreement II or within one year of its
termination.

The term "acquisition transaction" in the Jefferson Capital Letter
Agreement II means: (i) any merger, consolidation, reorganization,
recapitalization, business combination or other transaction pursuant to which
Shorewood is acquired by, or combined with any person, group, corporation,
partnership or other entity, or (ii)the acquisition, directly, by any acquiror
of (A) any of Shorewood's assets or operations or (B) any outstanding or newly
issued shares of Shorewood's capital stock (or securities convertible into or
options or other rights to acquire such capital stock). The term "restructuring"
in the Jefferson Capital Letter Agreement includes (x) any extraordinary
dividend or distribution paid by Shorewood to its stockholders, (y) a purchase
by Shorewood of 25% or more of its Common Stock, and (z) a sale or spin-off of
all or substantially all of the assets of, or 25% or more of the capital stock
of, any subsidiary or division of Shorewood.

Under the Jefferson Capital Letter Agreement II, Shorewood has also agreed
to reimburse Jefferson Capital for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel and other consultants
and advisors) and to indemnify Jefferson Capital and certain related parties
against certain liabilities, including liabilities under the federal securities
laws, relating to or arising out of Jefferson Capital's engagement by Shorewood.

Bear Stearns and Jefferson Capital have each provided investment banking
services to Shorewood from time to time in the past for which they have each
received customary compensation.

Shorewood has retained Innisfree M&A Incorporated ("Innisfree") to, among
other things, assist Shorewood in connection with its communications with its
stockholders with respect to, and to provide other services to Shorewood in
connection with, the Chesapeake Offer, the Consent Solicitation and related
matters. Shorewood will pay Innisfree reasonable and customary compensation for
their services and will reimburse Innisfree for its reasonable out-of-pocket
expenses incurred in connection therewith. Shorewood has also agreed to
indemnify Innisfree against certain liabilities and expenses arising from or in
connection with its engagement.

Shorewood has also retained Sard Verbinnen & Co. ("Sard Verbinnen") as its
public relations advisor in connection with the Chesapeake Offer, the Consent
Solicitation and related matters. Shorewood will pay Sard Verbinnen reasonable
and customary fees for its services, reimburse it for its reasonable
out-of-pocket expenses and provide customary indemnities.

Except as disclosed herein, neither Shorewood nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Chesapeake Offer.

ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.

(a) Except as described in the response to this Item 6(a), during the past
sixty (60) days there have been no transactions in Shares which were effected by
Shorewood or any subsidiary of Shorewood, or, to the best knowledge of
Shorewood, by any executive officer, director or affiliate of Shorewood. On
November 30, 1999, Marc P. Shore received 7,542 Shares and Andrew N. Shore
received 10,102 Shares pursuant to a transfer from the Estate of Paul Shore.
26
<PAGE> 28

(b) To the extent currently known to Shorewood, no executive officer,
director, affiliate or subsidiary of Shorewood currently intends to tender,
pursuant to the Chesapeake Offer, any Shares which are held of record or
beneficially owned by such person or to otherwise sell any such Shares.

ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.

(a) -- (b) At the meetings of the Shorewood Board held on December 9 and
December 15, 1999, the Shorewood Board considered and reviewed the feasibility
and desirability of exploring a variety of possible alternatives to the
Chesapeake Offer. As stated in Item 4 above and based on the factors referred to
therein, the Shorewood Board believes that the interests of Shorewood and its
stockholders would be best served by Shorewood exploring strategic alternatives
available to it to enhance stockholder value. These alternatives could lead to
and involve negotiations which relate to or could result in a sale of Shorewood,
but no decision has been made to seek the sale of Shorewood. The Shorewood Board
has instructed management and its financial advisors to explore potential
strategic alternatives available to Shorewood. Such alternatives could involve
an extraordinary transaction or combination of extraordinary transactions,
including (i) a sale or issuance of common stock, convertible preferred stock or
other securities of Shorewood to one or more buyers, (ii) a purchase, sale or
transfer of a material amount of assets by Shorewood or any of its subsidiaries,
(iii) a tender or exchange offer for, or open market or privately negotiated
purchases or other acquisition of securities by or of Shorewood, (iv) a merger
or reorganization involving Shorewood or any of its subsidiaries, (v) a
leveraged recapitalization or stock repurchase, (vi) a material change in the
present capitalization or dividend policy of Shorewood, or (vii) a joint venture
or other strategic alliance involving Shorewood or any of its subsidiaries. In
this regard, Shorewood has entered into confidentiality agreements concerning
the furnishing of confidential information to certain third parties, and has
otherwise engaged and is engaged in preliminary discussions with third parties
concerning their interest in pursuing a potential extraordinary transaction
involving Shorewood. Shorewood, Bear Stearns and Jefferson Capital have
identified a number of additional parties that may be interested in a possible
extraordinary transaction, and Shorewood may enter into confidentiality
agreements with, furnish confidential information to and engage in discussions
concerning such a transaction with some or all of such parties or other parties.
Shorewood expects that these discussions will include negotiations with respect
to one or more of the foregoing transactions.

The Shorewood Board has determined that disclosure at this time with
respect to these possible alternatives or the parties thereto, and the possible
terms of any other alternatives of the type referred to above in this Item 7,
might jeopardize the initiation or continuation of any discussions or
negotiations that Shorewood may conduct. Accordingly, the Shorewood Board, on
December 15, 1999, adopted a resolution instructing management of Shorewood not
to disclose the possible terms of any such transaction or proposals, or the
parties thereto, unless and until an agreement in principle relating thereto has
been reached.

There can be no assurance, however, that any of the foregoing will result
in any transaction being recommended to the Shorewood Board or that any
transaction that may be recommended will be authorized or consummated, or that a
transaction other than those described herein will not be proposed, authorized
or consummated. The initiation or continuation of any of the foregoing may also
be dependent upon the future actions of Chesapeake with respect to the
Chesapeake Offer. The proposal, authorization, announcement or consummation of
any transaction of the type referred to in this Item 7 could adversely affect or
result in withdrawal of the Chesapeake Offer.

Shorewood remains interested in acquiring Chesapeake. The Shorewood Board
believes that there is substantial unrealized value in Chesapeake which the
demonstrated skills of Shorewood management would realize and that an
acquisition of Chesapeake by Shorewood would be in the best interests of the
stockholders of both Shorewood and Chesapeake. However, the Shorewood Board has
noted the built-in corporate defenses of Chesapeake due to its status as a
Virginia corporation and the provisions of its charter and the refusal of
Chesapeake to consider an acquisition of Chesapeake by Shorewood. Given
Chesapeake's refusal to remove the many obstacles it has in place to impede any
attempt by Shorewood to acquire Chesapeake and Chesapeake's refusal to enter
into negotiations with Shorewood with respect to such an acquisition, the
Shorewood Board does not expect to pursue its interest in acquiring Chesapeake
at this time in the absence of a strategic alliance with a third party.
27
<PAGE> 29

At the December 15, 1999 meeting of the Shorewood Board, the Shorewood
Board resolved to delay any Distribution Date (as hereinafter defined) under the
Rights Agreement that arises solely by the virtue of the lapse of time following
the public announcement of the Chesapeake Offer, until such time as the
Shorewood Board or any authorized committee thereof shall designate, by
subsequent resolution fully adopted by the Shorewood Board or such committee
thereof.

ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.

DGCL 203

Section 203 of the DGCL purports to regulate certain business combinations
of a corporation organized under Delaware law, such as Shorewood, with a
stockholder beneficially owning 15% or more of the outstanding voting stock of
such corporation (an "Interested Stockholder"). Section 203 provides, in
relevant part, that the corporation shall not engage in any business combination
for a period of three years following the date such stockholder first becomes an
Interested Stockholder unless (i) prior to the time the stockholder first
becomes an Interested Stockholder, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an Interested Stockholder, (ii) upon becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, or (iii) on or subsequent to the date the stockholder becomes an
Interested Stockholder, the business combination is approved by the board of
directors and is authorized at an annual or special meeting of stockholders by
the affirmative vote of at least two-thirds of the outstanding voting stock
which is not owned by the Interested Stockholder.

For the reasons discussed above in paragraph numbered 5 of Item 4,
Shorewood believes that Chesapeake has become an Interested Stockholder and
consequently triggered the prohibition of Section 203 of the DGCL. In that case,
the Shorewood Board cannot, by itself, render Section 203 inapplicable to the
Chesapeake Offer or the Proposed Chesapeake Merger. Moreover, even if the
Shorewood Board could do so, in light of the Shorewood Board's determination
with respect to the Chesapeake Offer, as described in Item 4 above, the
Shorewood Board has determined, based in part, on the unanimous recommendation
of the Special Strategic Committee, to take no action at this time which would
attempt to render Section 203 of the DGCL inapplicable to the Chesapeake Offer
and the Proposed Chesapeake Merger. See "Litigation" below.

STOCKHOLDER RIGHTS PLAN

On May 4, 1995, the Shorewood Board authorized and declared a dividend
distribution of one Right for each outstanding Share to stockholders of record
at the close of business on June 14, 1995. Each Right entitles the registered
holder to purchase from Shorewood a unit consisting of one one-hundredth of a
share of Series B Junior Participating Preferred Stock ("Preferred Stock"), par
value $10.00 per share, at a purchase price of $17.00 per unit, subject to
adjustment.

Initially, the Rights attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates were
distributed. The Rights will separate from the Shares and a "Distribution Date"
will occur upon the earlier of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 25% or more of the
outstanding shares of Common Stock or (ii) 10 business days (or such later date
as may be determined by the Shorewood Board) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer that
would result in the beneficial ownership by a person or a group of 25% or more
of the outstanding shares of Common Stock.

The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 14, 2005, unless earlier redeemed by Shorewood
as described below.

Shares of Preferred Stock purchasable upon exercise of the Rights will not
be redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be entitled to
an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of the shares of Preferred Stock
will be entitled to a minimum preferential

28
<PAGE> 30

liquidation payment of $100 per share but will be entitled to an aggregate
payment of 100 times the payment made per share of Common Stock. Each share of
Preferred Stock will have 100 votes, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each share of Preferred Stock will be
entitled to receive 100 times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions.

Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.

In the event that Shorewood is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, in lieu of Preferred Stock, a number of shares of Common Stock of
the acquiring company at a fraction of the then-current market price for such
shares. In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise, in lieu of Preferred Stock, a number of shares of Common Stock at a
fraction of the then-current market price for one share of Common Stock. Based
on the market price for a share of Common Stock as of the date hereof, such
issuance of Common Stock would be effected at approximately one-quarter the
current market price of a share of Common Stock.

At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Shares, the Shorewood Board may exchange the Rights (other than Rights owned by
such person or group which will have become void), in whole or in part, at an
exchange ratio of one share of Common Stock, or one one-hundredth of a share of
Preferred Stock (or of a share of a class or series of Shorewood's preferred
stock having equivalent rights, preferences and privileges), per Right, subject
to adjustment.

At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 25% or more of the outstanding
Common Stock, the Shorewood Board may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time on such basis with such conditions
as the Shorewood Board in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.

The terms of the Rights may be amended by the Shorewood Board without the
consent of the holders of the Rights, including an amendment to lower certain
thresholds described above to not less than the greater of (i) any percentage
greater than the largest percentage of voting power of Shorewood then known to
be beneficially owned by any person or group of affiliated or associated person
(excluding certain persons affiliated with Shorewood), other than a person
holding voting power of Shorewood in excess of the then-existing thresholds
pursuant to the written permission of the Shorewood Board, and (ii) 10%, except
that from and after such time as any person or group of affiliated or associated
persons becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Shorewood, including, without limitation, the right
to vote or to receive dividends.

The Shorewood Board adopted the Rights Agreement to assure that all of
Shorewood's stockholders receive fair and equal treatment in the event of any
proposed takeover of Shorewood and to guard against partial tender offers, open
market accumulations and other abusive tactics to gain control of Shorewood
without paying all stockholders a control premium. The Rights will cause
substantial dilution to a person or group that acquires 50% or more of shares of
Common Stock on terms not approved by the Shorewood Board. The Rights should not
interfere with any merger or other business combination approved by the
Shorewood Board at any time prior to the first date that a person or group has
become an Acquiring Person.

29
<PAGE> 31

At the December 15, 1999 meeting of the Shorewood Board, the Shorewood
Board resolved to delay any Distribution Date under the Rights Agreement that
arises solely by the virtue of the lapse of time following the public
announcement of the Chesapeake Offer, until such time as the Shorewood Board or
any authorized committee thereof shall designate, by subsequent resolution fully
adopted by the Shorewood Board or such committee thereof.

The Rights Agreement specifying the terms of the Rights is filed as Exhibit
8 attached hereto and is incorporated by reference herein. The foregoing
description of the Rights is qualified in its entirety by reference to such
exhibit.

LITIGATION

Chesapeake Complaints

On December 3, 1999, Chesapeake and Sheffield commenced a lawsuit in the
Court of Chancery of the State of Delaware against Shorewood and each of the
members of the Shorewood Board seeking, among other things, an order (i)
declaring that the Shorewood Board breached its fiduciary duties by adopting
certain amendments to Shorewood's By-laws (the "By-law Amendments"), which
amendments, among other things (A) require the affirmative vote of holders of
two-thirds (66 2/3%) of the outstanding shares of Common Stock for the
stockholders to amend, add to, alter or repeal Shorewood's By-laws or adopt new
By-laws for Shorewood (the "Super Majority By-law"), (B) revise the procedure by
which the Shorewood Board fixes a record date for a solicitation of written
consents from Shorewood's stockholders (the "Consent Record Date By-law"), (C)
eliminate the ability of 20% of the stockholders to call a meeting of
stockholders, (D) provide that only the Chairman and the President of Shorewood
can call a meeting of the Shorewood Board, (E) provide that only the Shorewood
Board can fill vacancies on the Shorewood Board between meetings of
stockholders, and (F) provide that directors can be removed from the Shorewood
Board only pursuant to Section 141(k) of the DGCL, (ii) declaring the Super
Majority By-law and the Consent Record Date By-law void, and enjoining the
Shorewood Board from implementing the Super Majority By-law, the Consent Record
Date By-law and the By-law Amendments as a whole, (iii) declaring that failure
to redeem the Rights issued pursuant to the Rights Agreement, or to render the
Rights inapplicable to the Chesapeake Offer and the Proposed Chesapeake Merger
or to approve the Chesapeake Offer and the Proposed Chesapeake Merger would
constitute a breach of the Shorewood Board's fiduciary duties under Delaware
law, (iv) invalidating the Rights or compelling the Shorewood Board to redeem
the Rights or render the Rights inapplicable to the Chesapeake Offer and the
Proposed Chesapeake Merger, (v) declaring that failure to approve the Chesapeake
Offer and the Proposed Chesapeake Merger for purposes of Section 203 of the DGCL
would constitute a breach of the Shorewood Board's fiduciary duties under
Delaware law, (vi) compelling the Shorewood Board to approve the Chesapeake
Offer and the Proposed Chesapeake Merger for purposes of Section 203 of the
DGCL, (vii) enjoining the Shorewood Board from taking any other actions designed
to impede or which have the effect of impeding the Chesapeake Offer, the Consent
Solicitation or the Proposed Chesapeake Merger and declaring that any such
actions would constitute a breach of the Shorewood Board's fiduciary duties
under Delaware law, and (viii) enjoining the Shorewood Board from taking any
other actions to impede, or refuse to recognize the validity of, the Consent
Solicitation Statement.

Also on December 3, 1999, Chesapeake and Sheffield commenced litigation
against Shorewood in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that Chesapeake and
Sheffield have disclosed all information required by, and are otherwise in full
compliance with, the Exchange Act, and any other federal securities laws, rules
or regulations deemed applicable to the Chesapeake Offer and the Consent
Solicitation Statement.

The Court of Chancery of the State of Delaware has scheduled a trial on
certain issues for January 10, 11 and 13, 2000. The scope of issues to be
considered at such trial has not yet been determined.

Copies of each of the complaints described above are filed as Exhibits 19
and 20 hereto and are incorporated herein by reference, and the foregoing is
qualified in its entirety by reference to such exhibits.

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<PAGE> 32

Shorewood Counterclaims

On December 16, 1999, Shorewood filed an answer to Chesapeake's complaint
in the Court of Chancery of the State of Delaware denying all material
allegations of Chesapeake's complaint. Shorewood also filed a counterclaim
seeking, among other things, an order (i) declaring that Chesapeake is an
"interested stockholder" and "associate" of Shorewood within the meaning of
Section 203 of the DGCL, (ii) declaring that Chesapeake will remain an
"interested stockholder" and "associate" of Shorewood during the entire time
period prescribed by Section 203 of the DGCL, (iii) declaring that the refusal
of the Shorewood Board (as currently constituted or to be constituted in the
future within the time period prescribed by Section 203 of the DGCL) to take any
action rendering Section 203 of the DGCL inapplicable to the Chesapeake Offer
and the Proposed Chesapeake Merger does not constitute a breach of fiduciary
duty, (iv) declaring that the proposals to remove the members of the Shorewood
Board found in Chesapeake's Consent Solicitation (the "Removal Proposals") are
invalid under Section 141 of the DGCL, and (v) temporarily and permanently
enjoining the plaintiffs, their affiliates and all others acting in concert with
them, from taking any action in furtherance of the Removal Proposals.

On December 16, 1999, Shorewood filed an answer and counterclaim to
Chesapeake's complaint in the United States District Court for the District of
Delaware seeking, among other things, an order (i) declaring that Chesapeake's
and Sheffield's Schedule 14D-1 and Schedule 13D are materially false and
misleading, in violation of Sections 13(e) and 14(e) of the Exchange Act, and
(ii) preliminarily and permanently enjoining Chesapeake and Sheffield from
proceeding with the Chesapeake Offer in violation of Sections 13(e) and 14(e) of
the Exchange Act.

Neither Chesapeake nor Sheffield have filed an answer to either of
Shorewood's counterclaims.

Copies of each of the counterclaims described above are filed as Exhibits
21 and 22 hereto and are incorporated herein by reference, and the foregoing is
qualified in its entirety by reference to such exhibits.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

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<PAGE> 33

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
15. Shorewood Packaging Corporation Non-Qualified Stock Option
Agreement dated as of October 30, 1998 between Shorewood and
Jefferson Capital Group, Ltd.
16. Form of Trust Agreement.
17. Shorewood Employee Severance Plan.
18. Stockholders and Registration Rights Agreement dated as of
October 30, 1998 among Shorewood, Leonard Verebay and Eric
Kaltman.
19. Complaint in Chesapeake Corporation and Sheffield, Inc. v.
Shorewood Packaging Corporation, filed in the Court of
Chancery of the State of Delaware on December 3, 1999.
20. Complaint in Chesapeake Corporation and Sheffield, Inc. v.
Shorewood Packaging Corporation, filed in the U.S. District
Court for the District of Delaware on December 3, 1999.
21. Answer, Affirmative Defenses and Counterclaim of Defendants
in Chesapeake Corporation and Sheffield, Inc. v. Shorewood
Corporation, filed in the Court of Chancery of the State of
Delaware on December 16, 1999.
22. Answer and Counterclaim in Chesapeake Corporation and
Sheffield, Inc. v. Shorewood Corporation, filed in the
United States District Court for the District of Delaware on
December 16, 1999.
</TABLE>

32
<PAGE> 34

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.

SHOREWOOD PACKAGING CORPORATION

By: /s/ ANDREW N. SHORE
------------------------------------
Name: Andrew N. Shore
Title: Vice President, General
Counsel and Secretary

Dated: December 16, 1999

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<PAGE> 35

ANNEX A

This Annex A sets forth certain information in response to Item 3(b) of
this Schedule 14D-9 regarding (1) securities of Shorewood owned beneficially or
of record by Shorewood directors, executive officers and affiliates; (2) the
compensation of Shorewood's directors and certain of its executive officers; (3)
grants of stock options to, and exercise of stock options by, certain of its
executive officers; and (4) certain employee benefits and compensation plans.

SECURITY OWNERSHIP

SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS

According to information furnished to Shorewood as of December 10, 1999,
the directors of Shorewood, Shorewood's "named executive officers" (the "Named
Executive Officers") within the meaning of Item 402(a)(3) of Regulation S-K, and
all directors and executive officers as a group, beneficially owned Shares as
set forth below. Beneficial ownership has been determined for purposes herein in
accordance with Rule 13d-3 of the Exchange Act under which a person is deemed to
be the beneficial owner of securities if such person has or shares voting power
or investment power in respect of such securities or has the right to acquire
beneficial ownership within 60 days of December 10, 1999.

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF COMMON PERCENTAGE OF
SHARES AND SHARE OUTSTANDING
NAME EQUIVALENTS COMMON SHARES
- ---- ---------------- -------------
<S> <C> <C>
Marc P. Shore(1)............................................ 4,750,485 17.17%
Leonard J. Verebay(2)....................................... 500,180 1.81%
Charles Kreussling(3)....................................... 322,377 1.17%
R. Timothy O'Donnell(4)..................................... 326,118 1%
Howard M. Liebman(5)........................................ 233,269 (6)
Kenneth M. Rosenblum(7)..................................... 124,629 (6)
William P. Weidner(8)....................................... 57,000 (6)
Kevin J. Bannon(9).......................................... 33,000 (6)
Virginia A. Kamsky.......................................... 4,500 (6)
Andrew N. Shore(10)......................................... 169,052 (6)
William H. Hogan(11)........................................ 9,000 (6)
Sharon R. Fairley........................................... 0 (6)
All directors and executive officers as a group
(12 persons)(12)(13)...................................... 6,529,610 23.56%
</TABLE>

- ---------------
(1) Marc P. Shore is the Chairman and Chief Executive Officer of Shorewood.

The Shares reflected include: (1) 1,007,687 Shares owned outright by Marc
P. Shore, of which 85,650 Shares are restricted shares awarded pursuant to
Shorewood's Long-Term Incentive Program ("LTIP") and are subject to forfeiture;
(2) 348,478 Shares which could be acquired on or within sixty (60) days after
December 10, 1999 upon the exercise of stock options granted under Shorewood's
incentive and stock option plans (collectively, the "Incentive Plans"); (3)
586,062 Shares held by a marital trust created under the will of Paul B. Shore
for the benefit of his wife (the "Marital Trust") (see discussion below); (4)
2,700,000 Shares held by the Shore Family Partnership, L.P., a California
limited partnership (the "Family Partnership") (see discussion below); and (5)
108,258 Shares held by a marital trust created for the benefit of the wife of
Paul B. Shore.

The Marital Trusts are testamentary trusts for the benefit of Paul B.
Shore's wife created under the terms of his will. By the terms of the will, Marc
P. Shore has sole voting power with respect to all Shares owned by the Marital
Trust. Dispositive power over these Shares is shared with the co-trustees. The
Marital Trust also

A-1
<PAGE> 36

held 3,900 Shares as of December 1, 1999. Marc P. Shore disclaims beneficial
ownership with respect to 3,900 of such Shares.

The Family Partnership is an investment partnership for the benefit of Marc
P. Shore and the other children of Paul B. Shore and Ellen Shore. The Family
Partnership terminates on January 1, 2030, subject to earlier termination by
operation of law or under the terms of the Limited Partnership Agreement. By
virtue of his control over the Shore Family LLC, which is the sole general
partner of the Family Partnership, Marc P. Shore has effective decision-making
power with respect to all Shares owned by the Family Partnership. The Family
Partnership owned 2,700,000 Shares as of December 10, 1999. Marc P. Shore
disclaims beneficial ownership as to 2,459,970 of such Shares.

(2) Includes 500,000 Shares held in grantor retained annuity trust. Under the
terms of the Stockholders' Agreement, these shares are subject to contractual
restrictions on transfer until October 30, 2000, with limited exceptions for
certain types of inter-family, estate planning and affiliate transactions. These
restrictions terminate in various circumstances, including the occurrence of
certain types of capital events and "change of control" transaction.

(3) Includes 90,000 Shares owned by Charles Kreussling's wife, as to which Mr.
Kreussling disclaims beneficial ownership. The table does not include 750 shares
owned by one of Mr. Kreussling's adult children who shares the same household.

(4) Includes: (i) 450 Shares owned by Mr. O'Donnell's wife as custodian for
their three minor children; (ii) 22,231 Shares owned by Jefferson Capital (of
which Mr. O'Donnell is the President and a principal stockholder); (iii) 87,500
Shares which could be acquired on or within 60 days after December 10, 1999 upon
the exercise of warrants granted to Jefferson Capital and (iv) 18,000 shares
which could be acquired on or within 60 days after December 10, 1999 upon the
exercise of director options granted to Mr. O'Donnell under Shorewood's
Incentive Plans.

(5) Includes: (i) 67,432 Shares which could be acquired on or within sixty (60)
days after December 10, 1999 upon the exercise of stock options granted under
Shorewood's Incentive Plans; (ii) 79,101 shares of restricted stock awarded
under the LTIP, all of which are subject to forfeiture and (iii) 55,977 Shares
that are held by Shorewood as collateral for a $657,521 loan in connection with
the exercise of options.

(6) Less than 1% of the outstanding Shares.

(7) Includes: (i) 35,347 Shares which could be acquired on or within sixty (60)
days after December 10, 1999 upon the exercise of stock options granted under
Shorewood's Incentive Plans; and (ii) 5,178 shares of restricted stock awarded
under the LTIP, all of which are subject to forfeiture.

(8) Includes: (i) 18,000 Shares which could be acquired on or within sixty (60)
days after December 10, 1999 upon the exercise of director options granted under
Shorewood's Incentive Plans and (ii) 39,000 Shares owned by William P. Weidner's
wife, as to which Mr. Weidner disclaims beneficial ownership.

(9) Includes 18,000 Shares which could be acquired on or within sixty (60) days
after December 10, 1999 upon the exercise of director options granted under
Shorewood's Incentive Plans.

(10) Includes: (i) 5,000 Shares which could be acquired on or within sixty (60)
days after December 10, 1999 upon exercise of stock options granted under
Shorewood's Incentive Plans; (ii) 6,000 shares of restricted stock awarded under
the LTIP, all of which are subject to forfeiture; and (iii) 650 Shares owned by
Andrew N. Shore's wife, as to which Mr. Shore disclaims beneficial ownership.

(11) Includes: (i) 9,000 Shares of restricted stock awarded under the LTIP, all
of which are subject to forfeiture and (ii) 21,500 Shares which could be
acquired on or within sixty (60) days after December 10, 1999 upon the exercise
of director options granted under Shorewood's Incentive Plans.

(12) The total number of directors and executive officers of Shorewood includes
two executive officers who were not included in the above table.

A-2
<PAGE> 37

(13) Includes 695,181 Shares subject to stock options or warrants which could be
acquired on or within sixty (60) days after December 10, 1999 and 184,929 shares
of restricted stock awarded pursuant to the LTIP, all of which are subject to
forfeiture. Does not include the shares held by Messrs. Melvin L. Braun and
Floyd G. Glinert, who, until recently, were directors of Shorewood. Where more
than one person is deemed to be a beneficial owner of any particular shares,
such Shares have been counted toward the total listed only once.

DIRECTOR COMPENSATION

During the fiscal year ended May 1, 1999, each director who was not an
officer or an employee of Shorewood (an "Outside Director") received a
director's fee of $8,000 per annum plus $2,000 for attendance at each meeting of
the Shorewood Board and $1,000 for attendance at each meeting of a committee of
the Shorewood Board, ordinarily excluding the Shorewood Board or committee
meetings held by telephone conference call. All directors of Shorewood are also
reimbursed for certain expenses. Under the 1993 Incentive Program (the "1993
Program"), as amended in fiscal year 1997, the full Shorewood Board, in its
discretion, is authorized to grant to each Outside Director options to purchase
Shares, at option prices equal to the fair market value of Shares on the date of
grant. In June 1999, each Outside Director received an option to purchase 4,000
Shares pursuant to the 1993 Program on account of services in 1999. The vesting
of the options and certain other terms of the options are determined by the full
Shorewood Board in its discretion. Typically, the terms of the options provide
that the options are exercisable in full immediately upon the death of the
grantee or retirement from the Shorewood Board by reason of disability or upon a
"change of control" of Shorewood (as defined in the 1993 Program). Any
unexercised options shall terminate upon the expiration of ten years from the
date of grant or, if sooner, two years after the termination of a director for
any reason other than cause. If a director is removed for cause, all director
options immediately terminate.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee currently consists of Messrs. William P.
Weidner, Kevin J. Bannon and R. Timothy O'Donnell. During fiscal year 1999,
Melvin L. Braun served as an alternate member of the Compensation Committee. No
member of Shorewood's Compensation Committee is a current or former officer or
employee of Shorewood or any of its subsidiaries. There are no compensation
committee interlocks between Shorewood and any other entities involving any of
the executive officers or directors of such other entities.

Jefferson Capital, of which R. Timothy O'Donnell is the President and a
principal stockholder, has served as a compensated financial advisor to
Shorewood on various matters, including, but not limited to, the Chesapeake
Offer, the Consent Solicitation and related matters. (See Items 3 and 5.)

The Bank of New York, of which Kevin J. Bannon is an Executive Vice
President, is a participant in Shorewood's lending syndicate. The aggregate
amount of The Bank of New York's participation in Shorewood's outstanding
borrowings pursuant to credit facilities as at the end of fiscal year 1999 was
approximately $25,039,500. The Bank of New York also serves as Shorewood's
transfer agent.

CERTAIN TRANSACTIONS

In May 1995, Shorewood loaned $2.0 million to Marc P. Shore, the Chairman
and Chief Executive Officer of Shorewood. The loan is due on May 4, 2000 and
bears interest payable quarterly at the Applicable Federal Rate, as defined,
adjusted monthly. Mandatory prepayments of the loan are required if Mr. Shore's
compensation exceeds certain specified thresholds. The Compensation Committee
waived the required prepayment for 1999. The aggregate principal amount
outstanding under this loan as at the end of fiscal year 1999 was $2.0 million.

In May 1997, Shorewood guaranteed a portion of an $8.5 million loan made by
The Chase Manhattan Bank to Marc P. Shore in connection with his purchase of
certain real estate. As a result of provisions in the related agreement and
payments made by Mr. Shore, the guaranty was terminated in September 1998.

A-3
<PAGE> 38

Bryan Shore Resnick, the sister of Marc P. Shore and Andrew N. Shore, is a
travel agent with Reliable Travel, a travel agency which provides travel
services to Shorewood. Based upon information provided to Shorewood by Reliable
Travel, in fiscal year 1999, Reliable Travel earned approximately $182,500 in
commissions, of which approximately $89,500 was paid to Bryan Shore Resnick.
Such commissions were earned in the ordinary course of business and, to the best
knowledge of Shorewood, the services performed were at terms no less favorable
to Shorewood than had the services been provided by an unrelated third party.

In April 1998, Shorewood loaned $630,000 to Howard M. Liebman, the
President and Chief Financial Officer of Shorewood, in connection with his
purchase of a new residence. The loan is evidenced by a note which is secured by
a first priority mortgage on the property. Shorewood's interest in the mortgage
is insured by a title insurance company. The loan bears interest at the rate of
6.5% per annum. Interest is payable annually on August 1 of each year commencing
August 1, 1999. The final payment of principal and interest is due August 1,
2013. In addition, Shorewood may accelerate repayment of the loan in the event
Mr. Liebman sells the property prior to maturity or ceases to be employed by
Shorewood. The aggregate principal amount outstanding under this loan as at the
end of fiscal year 1999 was $630,000.

Effective June 23, 1999, Shorewood loaned $341,145 to Howard M. Liebman in
connection with his exercise of stock options to purchase 60,000 Shares. (Mr.
Liebman paid the equivalent of $358,857 with Shares already owned by him as part
of the purchase price.) Effective July 26, 1999 Shorewood loaned an additional
$316,376 to Howard M. Liebman in connection with his exercise of stock options
to purchase 26,736 Shares. Both loans bear interest at the rate of 6.5% per
annum, commencing as of the respective effective dates of the loans. The
principal amounts of and accrued interest on the loans are due and payable
October 2, 2000. The loans are collateralized by a pledge of 55,977 Shares.

Effective July 26, 1999, Shorewood loaned $527,316 to Marc P. Shore in
connection with his exercise of stock options to purchase 44,562 Shares. The
loan bears interest at the rate of 6.5% per annum, commencing as of the
effective date of the loan. The principal amount of and accrued interest on the
loan are due and payable October 2, 2000. The loan is collateralized by a pledge
of 44,562 Shares. During fiscal year 2000, Shorewood advanced to Mr. Shore
approximately $2.6 million. These advances were repaid in December 1999,
including interest at an annual rate of 6.71%.

A-4
<PAGE> 39

EXECUTIVE COMPENSATION

The following summary compensation table sets forth certain information
concerning the compensation of the Named Executive Officers for each of the
three fiscal years during the period ended May 1, 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION AWARDS
------------------- -----------------------
RESTRICTED OPTIONS TO ALL OTHER
STOCK PURCHASE COMPEN-
SALARY AWARDS SHARES(4) SATIONS(5)
NAME AND PRINCIPAL POSITION YEAR* ($) BONUS ($) ($)(3) (#) ($)
- --------------------------- ----------- ------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marc P. Shore.................. Fiscal 1999 800,000 1,093,000 825,000 350,000 149,625
Chairman of the Board and Fiscal 1998 800,000 302,000 -- -- 149,125(6)
Chief Executive Officer Fiscal 1997 815,385 450,000(2) -- 269,565 155,520(6)
Howard M. Liebman.............. Fiscal 1999 450,000 150,000 481,250 150,000 107,875(7)(8)
Executive Vice President, Fiscal 1998 325,000 100,000 497,490 -- 214,970(7)(8)
Chief Financial Officer Fiscal 1997 331,250 100,000 -- 26,737 142,043(7)(8)
and Director
Floyd S. Glinert**............. Fiscal 1999 299,988 -- -- -- 4,950
Executive Vice President -- Fiscal 1998 299,988 -- -- -- 5,950
Marketing and Director Fiscal 1997 305,757 -- -- -- 16,938
Charles Kreussling............. Fiscal 1999 250,000 125,000 -- -- 19,090
Executive Vice President -- Fiscal 1998 250,000 125,000 -- -- 15,964
Manufacturing Fiscal 1997 215,385 125,000 -- -- 18,449
Kenneth M. Rosenblum........... Fiscal 1999 175,692 100,000 -- 40,000 6,072
Senior Vice
President -- Sales Fiscal 1998 163,366 125,000 -- -- 6,179
Fiscal 1997 154,903 100,000 -- 43,507 5,895
</TABLE>

- ---------------
* 1997 was a 53-week year.

** Mr. Glinert resigned as an Executive Officer of Shorewood effective at the
end of fiscal year 1999.

(1) The aggregate amount of perquisites and other personal benefits for each of
the Named Executive Officers did not equal or exceed the lesser of either
$50,000 or 10% of the total of such individual's base salary and bonus, as
reported herein for the applicable fiscal years, and is not reflected in the
table.

(2) In fiscal 1997, Marc P. Shore received a $450,000 bonus. Mr. Shore was
entitled to receive a cash bonus in excess of $1.2 million in fiscal 1997
under a bonus plan of Shorewood (the "Bonus Plan"); however, Mr. Shore
waived such bonus and accepted the $450,000 bonus.

(3) Represents the dollar value on the date of grant of shares of restricted
stock awarded by the Compensation Committee to the named recipients under
the LTIP. The value of the restricted shares reported in this column was
calculated by multiplying the closing market price of the Common Stock as
reported on the New York Stock Exchange ("NYSE") on the date of grant by the
number of restricted shares, without any adjustment for forfeiture or
termination contingencies. The restricted stock awards identified in this
column consist of the following stock grants: (i) 30,000 shares to Howard M.
Liebman on October 30, 1997, (ii) 35,000 shares to Howard M. Liebman on June
8, 1998 and (iii) 60,000 shares to Marc P. Shore on June 8, 1998. These
awards are subject to three-or-four-year vesting requirements based on the
performance of Shorewood's Common Stock or, alternatively, an eight-year
employment vesting requirement. Under the terms of the awards, if the
grantee's employment terminates prior to vesting, their restricted shares
awarded to him will be forfeited. During the vesting period, the grantee may
not dispose of, but may vote, the restricted shares and is entitled to
receive any dividends paid on such shares.

In addition, in July 1994 the Compensation Committee awarded restricted
stock to certain executives pursuant to the LTIP. Set forth below are the
number and value of the aggregate restricted share holdings of each Named
Executive Officer as of May 1, 1999. Values were calculated by multiplying
the closing

A-5
<PAGE> 40

price of the Common Stock as reported on The New York Stock Exchange (the
"NYSE") on April 30, 1999 (the last trading day in the 1999 fiscal year) by
the respective number of shares.

<TABLE>
<CAPTION>
NAME EXECUTIVE OFFICER SHARES(#) VALUE($)
- ---------------------- --------- ---------
<S> <C> <C>
Marc P. Shore......................................... 85,650 1,691,588
Howard M. Liebman..................................... 79,101 1,562,245
Kenneth M. Rosenblum.................................. 5,178 102,266
</TABLE>

(4) Stock options are granted under the terms and provisions of Shorewood's
Incentive Plans.

(5) Amounts reported under this column include the dollar value of the
following:

<TABLE>
<CAPTION>
CONTRIBUTIONS TO
VALUE OF LIFE 401(K)
INSURANCE EMPLOYEE
PREMIUMS(A) SAVINGS PLAN(B)
NAME YEAR ($) ($)
- ---- ----------- ------------- -----------------
<S> <C> <C> <C>
Marc P. Shore...................... Fiscal 1999 14,120 6,500
Fiscal 1998 15,170 6,500
Fiscal 1997 19,070 8,395
Howard M. Liebman.................. Fiscal 1999 12,121 6,975
Fiscal 1998 13,501 4,371
Fiscal 1997 13,281 8,449
Floyd S. Glinert................... Fiscal 1999 -- 4,950
Fiscal 1998 -- 5,950
Fiscal 1997 10,538 6,400
Charles Kreussling................. Fiscal 1999 14,965 4,125
Fiscal 1998 12,214 3,750
Fiscal 1997 11,841 6,608
Kenneth M. Rosenblum............... Fiscal 1999 -- 6,072
Fiscal 1998 1,800 4,379
Fiscal 1997 1,800 4,095
</TABLE>

-----------------------
(a) Reflects life-insurance premiums paid by Shorewood on behalf of the
Named Executive Officer.

(b) Reflects contributions to Shorewood's tax-qualified 401(k) Employee
Savings Plan that covers all employees who have completed 1,000
hours of service and one year of employment.

(6) Includes (i) $122,367 paid in fiscal 1999, $120,817 paid in fiscal 1998 and
$121,417 paid in fiscal 1997, which represent Shorewood's share of premiums
paid in the respective years under a Split Dollar Life Insurance Arrangement
for the benefit of Marc P. Shore whereby Shorewood will generally recover in
full its share of the premiums upon the cancellation, or purchase by Mr.
Shore, of the life insurance policy or the payment of death benefits under
the life insurance policy and (ii) $6,638 paid in fiscal 1999, $6,638 paid
in fiscal 1998 and $6,638 in fiscal 1997, which represent disability
premiums paid by Shorewood in the respective years on behalf of Marc P.
Shore.

(7) Includes ($1,585) lost in fiscal 1999, $108,114 earned in fiscal 1998, and
$30,959 earned in fiscal 1997 by a trust established by Shorewood for Mr.
Liebman's benefit, pursuant to which income earned on the trust principal is
accumulated for payment to Mr. Liebman upon his retirement from Shorewood.

(8) Includes $90,364 paid in fiscal 1999, $88,984 paid in fiscal 1998 and
$89,354 paid in fiscal 1997, which represent Shorewood's share of premiums
paid in the respective years under a Split Dollar Life Insurance Arrangement
for the benefit of Howard M. Liebman whereby Shorewood will generally
recover in full its share of the premiums upon the cancellation, or purchase
by Mr. Liebman, of the life insurance policy or the payment of death
benefits under the life insurance policy.

A-6
<PAGE> 41

OPTION GRANTS TABLE

The following table provides certain summary information concerning
individual grants of stock options made to Named Executive Officers during the
fiscal year ended May 1, 1999 under Shorewood's Incentive Plans. Except as set
forth in the table below, during fiscal year 1999, Shorewood did not grant any
stock options under Shorewood's Incentive Plans to any of the Named Executive
Officers.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
-------------------------------------------------------- ASSUMED RATES OF STOCK PRICE
NUMBER OF PERCENT OF TOTAL APPRECIATION FOR OPTION
SHARE OPTIONS GRANTED EXERCISE TERM(1)
UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION ------------------------------
GRANT (#) FISCAL YEAR (%) ($) DATE 5% ($) 10% ($)
---------- ---------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Marc P. Shore........... 350,000 42.4% 13.75 6/08/08 3,026,555 7,669,886
Howard M. Liebman....... 150,000 18.2% 13.75 6/08/08 1,297,095 3,287,094
Kenneth M. Rosenblum.... 40,000 4.8% 13.75 6/08/08 345,892 876,558
</TABLE>

- ---------------
(1) Amounts represent hypothetical gains that could be achieved from the
exercise of the respective stock options and the subsequent sale of the
Shares underlying such options if the options were exercised at the end of
the option terms. The gains are based upon assumed rates of stock price
appreciation of 5% and 10% compounded annually from the date the respective
options were granted. The rates of appreciation are mandated by the rules of
the Exchange Act and do not represent Shorewood's estimate or projection of
the future Share price.

(2) The stock options reported were awarded pursuant to the 1993 Program at
exercise prices equal to the fair market value of the Shares on the date of
grant. The options vest in specified installments over a five-year period
after the grant date and terminate ten years after the grant date, subject
to early termination in the event of death or termination of the optionee's
employment for any reason. Payment for options exercised may be in cash or
Shares, fair market value of which is determined under the 1993 Program.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The following table provides certain summary information concerning stock
option exercises during the fiscal year ended May 1, 1999 by the Named Executive
Officers and the value of unexercised stock options held by the Named Executive
Officers as of May 1, 1999.

<TABLE>
<CAPTION>
NUMBER
OF SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL YEAR "IN THE MONEY" OPTIONS AT
ON VALUE END(1) (#) FISCAL YEAR END(2) ($)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marc P. Shore.............. -- -- 331,953 376,739 2,626,682 2,330,996
Howard M. Liebman.......... -- -- 124,168 166,042 1,025,973 1,038,585
Floyd S. Glinert........... -- -- -0- -0- -0- -0-
Charles Kreussling......... -- -- -0- -0- -0- -0-
Kenneth M. Rosenblum....... 10,856 87,271 18,560 66,104 162,801 468,009
</TABLE>

- ---------------
(1) Represents the aggregate number of stock options held as of May 1, 1999
which could and could not be exercised on that date pursuant to the terms of
the stock option agreements related thereto and the Incentive Plans.

(2) Values were calculated by multiplying (i) the respective number of shares by
(ii) the closing market price of the Shares as reported on the NYSE on April
30, 1999 (the last trading day of the 1999 fiscal year) less the exercise
price per share, without any adjustment for any termination or vesting
contingencies.

A-7
<PAGE> 42

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Overall Policy

Shorewood's executive compensation program is designed to be closely linked
to corporate performance and the total return to stockholders over the
long-term. To that end, Shorewood has developed an overall compensation strategy
and specific compensation plans which tie executive compensation to Shorewood's
success in meeting specified objectives and to appreciation in Shorewood's stock
price. The overall objectives are to attract and retain the best possible
executive talent, motivate key executives to achieve the goals inherent in
Shorewood's business strategy, link executive and stockholder interests through
participation in the LTIP and provide a compensation package that recognizes
individual contributions as well as overall business results.

Each year the Compensation Committee conducts a review of Shorewood's
executive compensation program. The review includes a comparison of Shorewood's
executive compensation, corporate performance, stock price appreciation and
total return to stockholders with a peer group of public corporations that
represent Shorewood's direct competitors for executive talent. The annual
compensation reviews permit an ongoing evaluation of the link between
Shorewood's performance and its executive compensation in the context of the
compensation programs of other companies. The peer group presently utilized by
the Compensation Committee is the Peer Group.

The Compensation Committee approves the compensation of executive officers
of Shorewood, including the individuals whose compensation is detailed in this
Proxy Statement. In reviewing the individual performance of the executive
officers of Shorewood whose compensation is detailed in this Proxy Statement,
the Compensation Committee takes into account the views of Marc P. Shore, the
Chairman and Chief Executive Officer of Shorewood, and the other members of the
Shorewood Board.

The key elements of Shorewood's executive compensation during the last
fiscal year consisted of base salary, an annual bonus and grants of stock
options and restricted stock under the LTIP. The Compensation Committee's
policies with respect to each of these elements are discussed below. In
addition, while the elements of compensation described below are considered
separately, the Compensation Committee takes into account the full compensation
package afforded by Shorewood to each individual.

Tax Deductibility of Executive Compensation Plans

It is the policy of the Compensation Committee to have the executive
compensation plans of Shorewood treated as fully tax deductible under Section
162(m) of the Code, whenever, in the judgment of the Committee, to do so would
be consistent with the business objectives of those plans. All compensation paid
during fiscal year 1999 was, in fact, fully tax deductible. The Compensation
Committee, however, has granted awards which may not be fully tax deductible,
and reserves the right to grant future compensation awards in such amounts as it
may deem appropriate in the exercise of its business judgement, notwithstanding
whether those awards are fully tax deductible.

Base Salaries and Annual Bonuses

Base salaries and annual bonuses for executive officers are determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison of base salaries for comparable positions at
other companies in the Peer Group. Annual salary adjustments and bonuses, if
any, are determined by evaluating the performance of Shorewood and of each
executive officer, and by taking into account added responsibilities. The
Compensation Committee, where appropriate, also considers non-financial
performance measures. These include increases in market share, manufacturing
efficiency gains, improvements in product quality and improvements in relations
with customers, suppliers and employees. These factors are afforded varying
levels of significance by the Committee depending upon the circumstances. All
final determinations are subjective.

In establishing the annual base salary of Marc P. Shore, Shorewood's
Chairman and Chief Executive Officer, the Committee also took into account a
comparison of base salaries of chief executive officers of the

A-8
<PAGE> 43

Peer Group, Shorewood's results of operations, the performance of Shorewood's
Common Stock and the subjective assessment by the members of the Committee of
Mr. Shore's individual performance.

The Committee has established, with the approval of the Shorewood Board and
the Stockholders, a performance Bonus Plan for the benefit of Marc P. Shore,
which is effective through fiscal year 2003. The Bonus Plan provides for the
grant of graduated performance bonuses, up to $2.0 million per annum, to Mr.
Shore based upon yearly comparisons of Shorewood's earnings from operations plus
depreciation and amortization. Bonuses pursuant to the Bonus Plan are payable
only if certain pre-established thresholds are met. The Bonus Plan is based
solely upon the performance criteria described above. Mr. Shore earned a bonus
in the amount of $1,093,000 in respect of fiscal year 1999 under the Bonus Plan.

Pursuant to the new five year employment agreement which Shorewood and Mr.
Shore entered into on June 8, 1998, Mr. Shore was granted a signing bonus in the
aggregate amount of $1,000,000, payable immediately in full but earned ratably
over his five year employment period, provided that Mr. Shore continues to be
employed with Shorewood at the end of each such year. The full amount of the
signing bonus was paid to Mr. Shore in fiscal year 1999. Because Mr. Shore was
employed with Shorewood at the end of the first year of his employment term, the
ratable portion of the signing bonus for the first year has been earned.

The Committee may also grant, and has in the past granted, Mr. Shore
discretionary bonuses outside of the Bonus Plan and his employment agreement.

Long-Term Incentive Plans

Pursuant to the 1993 Program, approved by the Stockholders in 1993, the
Committee adopted the LTIP which allows various types of awards keyed to
corporate performance, including stock options (focus on absolute growth in
stockholder value) and restricted shares (focus on relative growth in
stockholder value), subject to performance-based contingencies, which are made
available in amounts which the Committee determines to be competitive based on
the competitive market analyses described above.

Stock Options

Under the LTIP and Shorewood's other Incentive Plans, stock options are
periodically granted to Shorewood's employees, including executive officers. The
Compensation Committee sets guidelines for the size of the stock option awards
based on similar factors, including competitive compensation data, as are used
to determine base salaries and bonuses, if any. In the event of poor corporate
performance, the Compensation Committee can elect not to award stock options.
Final determinations are subjective.

Stock options are designed to align the interests of executives with those
of the stockholders. Stock options are granted with an exercise price equal to
the market price of the Common Stock on the date of grant and generally vest in
increments over a period of four or five years. This approach is designed to
incentivize the creation of stockholder value over the long term since the full
benefit of the compensation package cannot be realized by the option recipients
unless stock price appreciation occurs over a number of years.

Performance Based Restricted Stock

Under the LTIP, awards of restricted stock are made preceding a three-year
or four-year performance period. The Committee, together with Shorewood's Chief
Executive Officer, determine the size of the awards based on the same
competitive compensation data as are used to determine base salaries and
bonuses. Final determinations are subjective. At the end of the three-year or
four-year performance period, some or all of the shares of restricted stock may
vest depending upon Shorewood's relative stockholder growth compared to that of
the peer group over the same period. The peer group for grants of restricted
stock through fiscal year 1998 consisted of the same companies that make up the
Peer Group for the stock performance graph. The peer group for grants of
restricted stock in fiscal year 1999 consists both of the companies that make up
the Peer Group for the stock performance graph plus certain other public
companies. The Committee chose to expand the peer group for grants of restricted
stock in order to have reference to a wider pool of companies including certain
companies not directly competitive with Shorewood. The Committee believes that
the expanded peer group for such purposes is more meaningful and instructive.
Shares that do not vest, due to relative

A-9
<PAGE> 44

stockholder performance, will vest at the end of eight years assuming continued
employment. Initial grants of restricted stock were made during fiscal year
1995, of which the first performance based vesting opportunity arose in April
1997 and the remaining shares are due to vest in April 2002. Additional grants
of restricted stock were made during fiscal years 1998 and 1999 to certain key
employees and executives.

In connection with the extension of Marc P. Shore's employment agreement
for a period of five years, and in order to adequately incentivize Mr. Shore for
the duration of the employment term extension, the Committee granted Mr. Shore
60,000 restricted Shares and stock options to acquire 350,000 Shares.

Bonus Plan

In July 1995, the Shorewood Board approved the Bonus Plan, applicable to
the Chief Executive Officer Marc P. Shore. Under the Bonus Plan, for each fiscal
year of Shorewood through fiscal year 2003, Mr. Shore will be entitled to a
graduated bonus (the "Performance Bonus") based upon a comparison of Shorewood's
earnings from operations plus depreciation and amortization (the "Performance
Measure") in that award year with the immediately preceding fiscal year. The
size of the Performance Bonus, if any, is tied to the level of Shorewood's
performance, as measured by the Performance Measure. The maximum Performance
Bonus payable in respect of any award year under the Bonus Plan is $2.0 million.
No bonus was payable under the terms of the Bonus Plan for 1996. For fiscal
1997, a bonus of approximately $1.2 million would have been earned, had Mr.
Shore not voluntarily agreed to accept $450,000. For fiscal 1998, a bonus of
$302,000 was earned by Mr. Shore. For fiscal 1999, a bonus of approximately $1.1
million was earned by Mr. Shore.

EMPLOYMENT AND CONSULTING AGREEMENTS

Marc P. Shore

Marc P. Shore, Shorewood's Chairman and Chief Executive Officer, and
Shorewood entered into a new five-year employment agreement, effective as of May
3, 1998. The agreement granted Mr. Shore a signing bonus in the aggregate amount
of $1.0 million, payable immediately in full but earned ratably over his five-
year employment period, provided that Mr. Shore continues to be employed with
Shorewood at the end of each such year. If a "change in control" of Shorewood,
as defined in the agreement, occurs at any time during the last two years of the
agreement, the term of the agreement will be automatically extended for an
additional two years. If Mr. Shore's employment is terminated by Shorewood or
Mr. Shore within two years after the occurrence of a "change in control" of
Shorewood, as defined in the agreement, Mr. Shore would be entitled to a lump
sum payment equal to 2.99 times his average annual compensation during the five
calendar years preceding the year of the change in control. The agreement grants
Mr. Shore an annual base salary of $800,000 per annum, subject to periodic
increases at the discretion of the Shorewood Board. Mr. Shore's annual base
salary is currently $800,000. Mr. Shore is also entitled to participate in the
Bonus Plan, effective until 2003, pursuant to which he is eligible to receive
performance bonuses of up to $2.0 million per covered year if certain
pre-established thresholds are met. Mr. Shore earned a bonus of $1,093,000 under
the Bonus Plan on account of fiscal year 1999. The agreement also authorizes
Shorewood to grant Mr. Shore discretionary bonuses outside of the scope of the
Bonus Plan. The agreement requires Shorewood to maintain term life insurance on
the life of Mr. Shore and to carry supplemental disability insurance for his
benefit. Simultaneously with the authorization of Mr. Shore's employment
agreement by the Shorewood Board, Shorewood granted to Mr. Shore 60,000 shares
of restricted stock and options to acquire 350,000 shares.

Howard M. Liebman

Shorewood and Howard M. Liebman entered into a new five-year employment
agreement, effective as of May 3, 1998. If a "change in control" of Shorewood,
as defined in the agreement, occurs at any time during the last two years of the
agreement, the term of the agreement will be automatically extended for an
additional two years. Pursuant to the employment agreement, Mr. Liebman is
entitled to receive an annual base salary of $450,000, subject to periodic
increases at the discretion of the Shorewood Board. Mr. Liebman's annual base
salary is currently $450,000. The agreement provides that if Mr. Liebman's
employment is terminated by Shorewood or Mr. Liebman within two years after the
occurrence of a "change in control" of Shorewood, as

A-10
<PAGE> 45

defined in the agreement, Mr. Liebman would be entitled to receive a lump sum
payment equal to 2.99 times his average annual compensation during the five
calendar years preceding the year of the change of control. Simultaneously with
the authorization of Mr. Liebman's employment agreement by the Shorewood Board,
Shorewood granted to Mr. Liebman 35,000 shares of restricted stock and options
to purchase 150,000 shares. Shorewood has also established a trust, pursuant to
which income earned on the trust principal fund of $300,000 is accumulated for
payment to Mr. Liebman upon his retirement from Shorewood, with the principal
fund then being returned to Shorewood. However, the assets of the trust are
subject to claims of creditors of Shorewood in the event of its insolvency. The
trust declined in value by $1,585 in fiscal year 1999.

Leonard J. Verebay

In connection with the Queens Transaction, Leonard J. Verebay entered into
a three-year employment agreement with Shorewood, expiring on December 31, 2001.
The Agreement provides for a five-year consulting period following the
expiration of the initial employment term. Under the agreement, Mr. Verebay is
to be employed by Shorewood as an Executive Vice President at a salary of
$500,000 per annum, subject to annual increases at the discretion of the
Shorewood Board. Mr. Verebay is also entitled to participate, to the extent
eligible, in Shorewood sponsored benefit plans to the same extent as similarly
situated executives. During any consultancy period, Mr. Verebay would be
entitled to receive a fee of $10,000 per annum and an automobile allowance as
well as participation, to the extent eligible, in Shorewood's group family
medical insurance plan. The agreement contains customary confidentiality,
work-for-hire and non-competition covenants applicable for the duration of all
applicable employment and consultancy periods. The agreement is subject to early
termination by Shorewood in the case of the death or disability of Mr. Verebay
or if he engages in certain types of "objectionable conduct" specified in the
agreement. Mr. Verebay may terminate the agreement upon the occurrence of
certain types of capital events and "change of control" transactions specified
in the agreement.

Eric Kaltman

In connection with the Queens Transaction, Eric Kaltman entered into a
three-year employment agreement with Shorewood to be employed as an Executive
Vice President of Shorewood, which agreement is substantially identical to the
agreement between Shorewood and Mr. Verebay, as described above.

Virginia A. Kamsky

KAI, of which Virginia A. Kamsky (a director of Shorewood) is the founder,
chief executive officer, chairman and principal stockholder, has been advising
Shorewood for approximately three years in connection with the China Business,
pursuant to the terms of the KAI Consulting Agreement. Shorewood pays KAI a
consulting fee of $25,000 per month under the KAI Consulting Agreement.
Additionally, under the terms of the Profit Participation Agreement, KAI is
entitled to receive up to 5% of Shorewood's allocable share (presently 55%) of
any "net profits" -- as defined in the agreement -- generated from the Profit
Participation. Transfer of the Profit Participation is subject to a right of
first refusal in favor of Shorewood. KAI may put its Profit Participation rights
to Shorewood at any time after three years from the production of the China
Business' first commercial product at the then fair market value of such
interest, as determined by a mutually agreeable third-party appraiser. Under the
terms of the Profit Participation Agreement, Shorewood is required to exert its
reasonable best efforts to cause Ms. Kamsky to be elected to the Shorewood Board
or other governing body of the operating entity which manages the China
Business.

R. Timothy O'Donnell

From time to time, Jefferson Capital serves as a compensated financial
advisor to Shorewood in connection with various matters. Jefferson Capital is
presently serving as a co-financial advisor to Shorewood in connection with the
Chesapeake Offer, the Consent Solicitation and related matters (see Items 3 and
5 of the Schedule 14D-9). R. Timothy O'Donnell, a member of the Shorewood Board,
is the President and principal stockholder of Jefferson Capital.

A-11
<PAGE> 46

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1. Letter to Stockholders from Marc P. Shore dated December 16,
1999.
2. Opinion of Bear, Stearns & Co. Inc. dated December 15, 1999.
3. Press Release issued by Shorewood on December 16, 1999.
4. Article Four, Part II Section 4 of Shorewood's Certificate
of Incorporation, as amended to date.
5. Article VII of Shorewood's By-laws, as amended to date.
6. Shorewood Packaging Corporation 1995 Performance Bonus Plan.
7. Shorewood Packaging Corporation 1993 Incentive Program, as
amended May 4, 1995.
8. Rights Agreement, dated as of June 12, 1995, between
Shorewood and The Bank of New York, as Rights Agent.
9. Amended and Restated Employment Agreement effective as of
May 3, 1998 between Shorewood and Howard M. Liebman.
10. Amended and Restated Employment Agreement effective as of
May 3, 1998 between Shorewood and Marc P. Shore.
11. Shorewood Packaging Corporation Employee Non-Qualified Stock
Option Agreement dated as of April 17, 1997 between
Shorewood and Marc P. Shore.
12. Employment Agreement between Shorewood and Leonard Verebay
dated as of October 30, 1998.
13. Employment Agreement between Shorewood and Eric Kaltman
dated as of October 30, 1998.
14. Consulting Agreement dated January 1, 1996 between Shorewood
and Kamsky Associates, Inc.
15. Shorewood Packaging Corporation Non-Qualified Stock Option
Agreement dated as of October 30, 1998 between Shorewood and
Jefferson Capital Group, Ltd.
16. Form of Trust Agreement.
17. Shorewood Employee Severance Plan.
18. Stockholders and Registration Rights Agreement dated as of
October 30, 1998 among Shorewood, Leonard Verebay and Eric
Kaltman.
19. Complaint in Chesapeake Corporation and Sheffield, Inc. v.
Shorewood Packaging Corporation, filed in the Court of
Chancery of the State of Delaware on December 3, 1999.
20. Complaint in Chesapeake Corporation and Sheffield, Inc. v.
Shorewood Packaging Corporation, filed in the U.S. District
Court for the District of Delaware on December 3, 1999.
21. Answer, Affirmative Defenses and Counterclaim of Defendants
in Chesapeake Corporation and Sheffield, Inc. v. Shorewood
Corporation, filed in the Court of Chancery of the State of
Delaware on December 16, 1999.
22. Answer and Counterclaim in Chesapeake Corporation and
Sheffield, Inc. v. Shorewood Corporation, filed in the
United States District Court for the District of Delaware on
December 16, 1999.
</TABLE>

<PAGE> 1
Exhibit 1

[Shorewood Packaging Letterhead]
December 16, 1999

Dear Fellow Stockholders:

On December 3, 1999, Chesapeake Corporation, through its wholly owned
subsidiary, Sheffield, Inc., commenced an unsolicited tender offer for all of
the outstanding shares of common stock of Shorewood Packaging Corporation at
$17.25 per share in cash.

AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT CHESAPEAKE'S OFFER IS INADEQUATE, IS NOT IN THE BEST INTERESTS
OF SHOREWOOD AND ITS STOCKHOLDERS AND DOES NOT ADEQUATELY REFLECT THE VALUE OR
PROSPECTS OF SHOREWOOD. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU
REJECT CHESAPEAKE'S OFFER AND NOT TENDER ANY OF YOUR SHARES TO CHESAPEAKE.

In recommending that stockholders reject Chesapeake's offer, your Board has
taken into account a variety of factors, including:

- the Board's view that the Chesapeake offer is inadequate and does not
reflect the inherent value of Shorewood as a leading value-added provider
of high quality printing and paperboard packaging products for the music,
computer software, cosmetics and toiletries, food, home video, tobacco,
and general consumer markets in North America.

- the written opinion of Bear, Stearns & Co. Inc., Shorewood's financial
advisor, that Chesapeake's offer price is inadequate from a financial
point of view to Shorewood's stockholders (other than Chesapeake and its
affiliates).

- the opportunistic timing of Chesapeake's offer, which seeks to exploit
Shorewood's recent stock price in relation to historic trading patterns.

- the significant uncertainties and contingencies associated with
Chesapeake's offer, including the numerous conditions to Chesapeake's
financing and our belief that one or more of these conditions cannot be
satisfied.

- the significant uncertainties associated with the second-step merger
proposed by Chesapeake, including uncertainty as to the permissibility of
such merger under Section 203 of the Delaware corporate law.

- the Board's belief that Chesapeake's offer represents an attempt by
Chesapeake to usurp for itself the future growth in revenues, net income
and cash flow and stock price appreciation that are only beginning to
result from Shorewood's recent capital expenditures and other initiatives
aimed at making Shorewood the premier global supplier of value-added
packaging.

- the Board's view that, based upon, among other things, the preliminary
discussions that Shorewood has had with certain unsolicited third
parties, Shorewood has a variety of strategic alternatives available to
it to enhance stockholder value, and that Shorewood's management,
together with Shorewood's financial advisors, should review such
alternatives.

Additional information with respect to the Board's decision to recommend
that stockholders reject Chesapeake's offer and the matters considered by the
Board in reaching such decision is contained in the attached Schedule 14D-9. We
urge you to read it carefully and in its entirety.

In closing, Shorewood has a proven track record of revenue and earnings
growth as well as a history of creating stockholder value. Your management and I
plan to continue our efforts on your behalf and we greatly appreciate your
continued support and encouragement.

Sincerely,

/s/ Marc P. Shore
Marc P. Shore
Chairman of the Board and
Chief Executive Officer

[Shorewood Packaging Letterhead]

<PAGE> 1
Exhibit 2

[BEAR STEARNS LETTERHEAD]

December 15, 1999

The Board of Directors
Shorewood Packaging Corporation
277 Park Avenue
New York, NY 10172

Ladies and Gentlemen:

On December 3, 1999, Sheffield, Inc. ("Purchaser"), a wholly owned subsidiary of
Chesapeake Corporation ("Chesapeake"), commenced a tender offer to purchase all
of the outstanding shares of common stock, $0.01 par value per share (the
"Common Stock"), of Shorewood Packaging Corporation ("Shorewood"), including the
associated rights to purchase preferred stock (the "Rights" and, together with
the Common Stock, the "Shares"), other than Shares owned by Chesapeake and its
affiliates, at a price of $17.25 per Share, net to the seller in cash (the
"Consideration"), upon the terms and subject to the conditions set forth in the
Offer to Purchase dated December 3, 1999 (the "Offer to Purchase") and related
Letter of Transmittal (which collectively constitute the "Chesapeake Offer").
The terms of the Chesapeake Offer are more fully set forth in the Schedule 14D-1
(the "Schedule 14D-1") filed by the Purchaser and Chesapeake with the Securities
and Exchange Commission on December 3, 1999.

You have asked us to render our opinion as to whether the Consideration offered
in the Chesapeake Offer is adequate, from a financial point of view, to the
holders of Shorewood Common Stock, other than Chesapeake and its affiliates.

In the course of performing our review and analyses for rendering this opinion,
we have:

- reviewed the Offer to Purchase and the Schedule 14D-1;

- reviewed Shorewood's Annual Reports to Stockholders and Annual
Reports on Form 10-K for the fiscal years ended April 29, 1995
through May 1, 1999 and Shorewood's Quarterly Report on Form
10-Q for the period ended October 30, 1999;

- reviewed certain operating and financial information,
including projections, provided to us by management relating
to Shorewood's business and prospects;

<PAGE> 2
Shorewood Packaging Corp.
December 15, 1999
Page 2

- met with certain members of Shorewood's senior management to
discuss Shorewood's business, operations, historical and
projected financial results and future prospects;

- reviewed the historical prices, trading multiples and trading
volume of the Shorewood Common Stock;

- reviewed publicly available financial data, stock market
performance data and trading multiples of companies which we
deemed generally comparable to Shorewood;

- reviewed the terms of recent acquisitions of companies which
we deemed generally comparable to Shorewood;

- performed discounted cash flow and other analyses based on the
projections for Shorewood furnished to us; and

- conducted such other studies, analyses, inquiries and
investigations as we deemed appropriate.

We have relied upon and assumed, without independent verification, the accuracy
and completeness of the financial and other information, including without
limitation the projections, provided to us by Shorewood. With respect to
Shorewood's projected financial results, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgement of the senior management of Shorewood as to the expected future
performance of Shorewood. We have not assumed any responsibility for the
independent verification of any such information or of the projections provided
to us, and we have further relied upon the assurances of the senior management
of Shorewood that it is unaware of any facts that would make the information and
projections provided to us incomplete or misleading.

In arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets or liabilities of Shorewood, nor have we been furnished
with any such appraisals. We note that, since the announcement of Chesapeake's
interest in acquiring Shorewood, third parties have made inquiries or requested
information with respect to possible transactions involving Shorewood. Shorewood
has not requested us to solicit, and as of the date hereof we have not
solicited, indications of interest from any other parties in connection with a
possible acquisition of, or business combination with, Shorewood. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.

We have acted as financial advisor to Shorewood in connection with the
Chesapeake Offer and will receive a fee for such services. In the ordinary
course of business, Bear Stearns may actively trade the equity and debt
securities of Shorewood and/or

<PAGE> 3
Shorewood Packaging Corp.
December 15, 1999
Page 3

Chesapeake for our own account and for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.

Our opinion is limited to the adequacy, from a financial point of view, of the
Consideration offered in the Chesapeake Offer to the holders of Shorewood Common
Stock, other than Chesapeake and its affiliates, and does not constitute a
recommendation to the Board of Directors of Shorewood as to what position it
should take with respect to the Chesapeake Offer or to any holders of Shorewood
Common Stock as to whether or not to tender Shares pursuant to the Chesapeake
Offer or how to vote with respect to any proposal presented to the holders of
Shorewood Common Stock. This letter is intended for the benefit and use of the
Board of Directors, is not to be used for any other purpose, or to be
reproduced, disseminated, quoted to or referred to at any time, in whole or in
part, without our prior written consent; provided, that this letter may be
reproduced in full in the Schedule 14D-9 to be filed by Shorewood with respect
to the Chesapeake Offer.

Based on and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration offered in the Chesapeake Offer is inadequate, from a
financial point of view, to the holders of Shorewood Common Stock, other than
Chesapeake and its affiliates.

Very truly yours,

BEAR, STEARNS & CO. INC.

By:/s/ Terence Cryan
----------------------------
Senior Managing Director

<PAGE> 1
Exhibit 3

FOR IMMEDIATE RELEASE:

CONTACTS:
Sard Verbinnen & Co.
David Reno/Paul Caminiti
(212) 687-8080

SHOREWOOD BOARD REJECTS CHESAPEAKE'S OFFER AS INADEQUATE

FILES COUNTERCLAIMS ALLEGING CHESAPEAKE IS "INTERESTED STOCKHOLDER";
COULD JEOPARDIZE ITS FINANCING IF MERGER NOT POSSIBLE FOR THREE YEARS
--------------------------------------------------------------------------

NEW YORK, DECEMBER 16, 1999 - Shorewood Packaging Corporation (NYSE:
SWD) announced today that its Board of Directors voted unanimously to recommend
that stockholders reject the unsolicited $17.25 per share tender offer by
Chesapeake Corporation (NYSE: CSK) and not tender any of their shares pursuant
to the offer.

In recommending that stockholders reject Chesapeake's offer,
Shorewood's Board cited the following:

o the Board's view that the Chesapeake offer is inadequate and does not
reflect the inherent value of Shorewood as a leading value-added
provider of high quality printing and paperboard packaging products
for the music, computer software, cosmetics and toiletries, food,
home video, tobacco, and general consumer markets in North America.

o the written opinion of Bear, Stearns & Co. Inc., Shorewood's financial
advisor, that Chesapeake's offer price is inadequate from a financial
point of view to Shorewood's stockholders (other than Chesapeake and
its affiliates).

o the opportunistic timing of Chesapeake's offer, which seeks to exploit
Shorewood's recent stock price in relation to historic trading
patterns.

o that Chesapeake's offer price represents a 15% to 20% discount to the
one year target prices for Shorewood's stock (without taking into
account any extraordinary transaction) which have been announced by
several major Wall Street brokerage firms that cover Shorewood.

o the significant uncertainties and contingencies associated with
Chesapeake's offer, including the numerous conditions to Chesapeake's
financing and the Board's belief that one or more of these conditions
cannot be satisfied.

<PAGE> 2

o the significant uncertainties associated with the second-step merger
proposed by Chesapeake, including uncertainty as to the permissibility
of such merger within three years under Section 203 of the Delaware
corporate law.

o the Board's belief that Chesapeake's offer represents an attempt by
Chesapeake to usurp for itself the future growth in revenues, net
income and cash flow and stock price appreciation that are only
beginning to result from Shorewood's recent capital expenditures and
other initiatives aimed at making Shorewood the premier global
supplier of value-added packaging.

o the Board's view that based on, among other things, the preliminary
discussions Shorewood has had with certain unsolicited third parties,
Shorewood has a variety of strategic alternatives available to it to
enhance stockholder value.

Marc P. Shore, Chairman and Chief Executive Officer, stated,
"Chesapeake's hostile offer is clearly inadequate. It represents a significant
discount to our 52-week high, does not accurately reflect the Company's growth
prospects and may not be capable of being completed. Shorewood is a strong and
growing company with a proven track record and an exciting future. "

Shore added, "The Board is fully committed to enhancing value for
Shorewood stockholders and has authorized management and its advisors to explore
the various strategic alternatives available to us. We look forward to
completing that process."

<PAGE> 3

Additional information with respect to the Board's decision to
recommend that stockholders reject Chesapeake's offer and the matters considered
by the Board in reaching such decision is contained in Shorewood's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being filed
today with the Securities and Exchange Commission and will be mailed to
stockholders shortly.

Shorewood Packaging Corporation is a leading value-added provider of
high quality printing and paperboard packaging for the computer software,
cosmetics and toiletries, food, home video, music, tobacco and general consumer
markets in North America and China, with 16 plants in the United States, Canada
and China.

# # #

Certain statements included in this press release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are typically identified by their inclusion of phrases
such as "Shorewood anticipates," "Shorewood believes"' and other phrases of
similar meaning. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of Shorewood to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others: general economic
and business conditions; competition; political changes in international
markets; raw material and other operating costs; costs of capital equipment;
changes in foreign currency exchange rates; changes in business strategy or
expansion plans; the results of continuing environmental compliance testing and
monitoring; quality of management; availability, terms and development of
capital; fluctuating interest rates and other factors referenced in this release
and in Shorewood's annual report on Form 10-K and quarterly reports on Form
10-Q.

CERTAIN INFORMATION CONCERNING PARTICIPANTS

<PAGE> 4

Chesapeake and its wholly owned subsidiary, Sheffield, Inc., to purchase shares
of Common Stock for $17.25 per share net to the seller in cash, for which Bear
Stearns and Jefferson Capital may receive substantial fees, as well as
reimbursement of reasonable out-of-pocket expenses. In addition, Shorewood has
agreed to indemnify Bear Stearns, Jefferson Capital and certain related persons
against certain liabilities, including certain liabilities under the federal
securities laws, arising out of their engagement. Neither Bear Stearns nor
Jefferson Capital admit that they or any of their partners, directors, officers,
employees, affiliates or controlling persons, if any, is a "participant" as
defined in Schedule 14A promulgated under the Securities Exchange Act of 1934,
as amended, in the solicitation of consent revocations, or that Schedule 14A
requires the disclosure of certain information concerning Bear Stearns and
Jefferson Capital, respectively.

In connection with Bear Sterns' role as co-financial advisor to
Shorewood, Bear Stearns and the following investment banking employees of Bear
Stearns may communicate in person, by telephone or otherwise with a limited
number of institutions, brokers or other persons who are stockholders of
Shorewood and may solicit consent revocations therefrom: Terence Cryan (Senior
Managing Director), Charles Edelman (Senior Managing Director), Mark A. Van Lith
(Managing Director) and Karen Duffy (Vice President). Bear Stearns engages in a
full range of investment banking, securities trading, market-making and
brokerage services for institutional and individual clients. In the normal
course of its business Bear Stearns may trade securities of Shorewood for its
own account and the accounts of its customers, and accordingly, may at any time
hold a long or short position in such securities. Bear Stearns has informed
Shorewood that, as of the date hereof, Bear Stearns held no shares of Common
Stock for its own account. Bear Stearns and certain of its affiliates may have
voting and dispositive power with respect to certain shares of Common Stock held
in asset management, brokerage and other accounts. Bear Stearns and such
affiliates disclaim beneficial ownership of such shares of Common Stock.

<PAGE> 1
Exhibit 4

Article Four, Part II Section 4 of Shorewood's Certificate of Incorporation
as amended to date:

4. (a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.

(b) The Corporation may indemnify (but except as provided in
paragraph (g) shall not be required to indemnify) any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was an employee or agent of the Corporation, or
is or was serving at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.

(c) For purposes of paragraphs (a) and (b) the termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that any person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

(d) Except as provided in paragraph (f) the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the Corporation, or is or was serving at the
request of the
<PAGE> 2
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation.

(e) Except as provided in paragraph (f), the Corporation may
indemnify (but except as provided in paragraph (g) shall not be required to
indemnify) any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation.

(f) No person shall be indemnified under paragraphs (d) or (e)
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which said Court of Chancery
or such other court shall deem proper.

(g) To the extent that any employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (b) and (e), or in defense
of any claim, issue or matter described therein, he shall be indemnified by the
Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

(h) Any indemnification under paragraphs (a), (b), (d) or (e)
(unless ordered by a court) shall be made by the Corporation only as authorized
by the Board of Directors in its discretion in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in paragraphs (a), (b), (d) or (e). Such determination shall
be made (i) by the Board of Directors by

2
<PAGE> 3
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.

(i) Expenses incurred by an officer or director in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the manner provided in paragraph (h)
upon receipt of an undertaking by or on behalf of the director or officer to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation under this Section 4. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.

(j) The indemnification provided by this Section 4 shall not
be deemed exclusive of any other rights to which those who are required to be,
or who may be, indemnified under this Section 4 might be entitled under any
by-law, agreement, vote of stockholders or vote of disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.

(k) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would be required or permitted to indemnify him
against such liability under the provisions of this Section 4.

(l) For the purposes of this Section 4, references to "the
Corporation" include all constituent corporations absorbed in a consolidation
or merger as well as the resulting or surviving corporation so that any person
who is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions of this Section 4 with respect to the resulting or surviving
corporation as he would if he had served the resulting or surviving corporation
in the same capacity. In addition, to the extent permitted by

3
<PAGE> 4
law, the mandatory indemnification provided by this Section 4 to directors and
officers of the Corporation shall cover expenses of any director or officer
incurred in connection with any claims based on alleged action taken prior to
the organization of the Corporation in contemplation of the organization of the
Corporation and the acquisition by it of the capital stock or business of
another corporation.

(m) For purposes of this Section 4, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Section 4.

<PAGE> 1
Exhibit 5

ARTICLE VII of Shorewood's By-laws, as amended to date:

Indemnification

The Corporation shall indemnify any director or officer of the
Corporation or a subsidiary, or any person serving at the request of the
Corporation or a subsidiary as a director, officer or member of another
corporation, partnership, joint venture, trust, committee or other enterprise or
any person who is or was an employee or agent of the Corporation or a
subsidiary, as deemed advisable by the Board of Directors, to the full extent
permitted by Delaware law or any other applicable law.

The indemnification and advancement of expenses permitted by
law shall, unless otherwise provided, when authorized or ratified, continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.

<PAGE> 1
Exhibit 6

CONFIDENTIAL TREATMENT*/

SHOREWOOD PACKAGING CORPORATION

1995 PERFORMANCE BONUS PLAN

The 1995 Performance Bonus Plan (the "Plan") of Shorewood Packaging
Corporation (the "Company") authorizes the grant of annual performance bonuses
(each, a "Performance Bonus") to Marc P. Shore, the Company's President and
Vice Chairman of the Board (the "Executive"), upon the attainment of certain
performance objectives set forth below. The Plan is administered by the
Compensation and Stock Option Committee (the "Committee").

1. DEFINITIONS. Certain defined terms in the Plan shall have the meanings
ascribed to them below:

(a) "Award Year" means each fiscal year of the Company during the five
year period beginning on May 1, 1995.

(b) "Earnings from Operations" shall mean, with respect to any fiscal
year of the Company, the Company's consolidated earnings from operations plus
depreciation and amortization, determined in accordance with the Company's
audited financial statements for that fiscal year. For purposes of computing
Earnings from Operations, (i) if during any Award Year the Company or any of
its subsidiaries acquires, directly or indirectly, any material business, the
Company's Earnings from Operations in the immediately preceding fiscal year and
that portion of such Award Year preceding the date of the acquisition shall be
adjusted to include therein the earnings from operations plus depreciation and
amortization of the acquired business during the applicable periods; and (ii)
if during any Award Year the Company or any of its subsidiaries disposes or
divests itself, directly or indirectly, of any material business, the Company's
Earnings from Operations in the immediately preceding fiscal year and that
portion of such Award Year preceding the date of the disposition shall be
adjusted to exclude therefrom the earnings from operations plus depreciation
and amortization of the divested business during the applicable periods.

(c) "First Tier Bonus" shall mean, with respect to any Award Year of
the Company, an amount determined in accordance with the following formula:

$200,000 multiplied by Y = Bonus
---
[*]

As used above, "Y" means the numeral (without regard to its value as a
percentage) used in expressing the percentage increase in the Company's
Earnings from Operations in that fiscal year as compared with the Company's
Earnings from Operations in the immediately preceding fiscal year (i.e., if
the percentage increase is [*], Y would be [*]). Y shall in no event exceed
[*].

__________________________________

*/Portions of this document have been omitted pursuant to an Application for
Confidential Treatment which was previously filed. Such omissions were filed
separately with the Securities and Exchange Commission together with such
Application for Confidential Treatment.
<PAGE> 2
By way of illustration, if the Company's Earnings from Operations in fiscal
year 1 is $[*] and its Earnings from Operations in fiscal year 2 is $[*], Y
would be [*] (representing the percentage increase in Earnings from Operations
from fiscal year 1 to fiscal year 2). In such case, Executive's First Tier
Bonus in respect of fiscal year 2 would be $[*].

(d) "Second Tier Bonus" shall mean, with respect to any Award Year of the
Company, an amount determined in accordance with the following formula:

$1,600,000 multiplied by Z = Bonus
---
[*]

As used above, "Z" means the numeral (without regard to its value as a
percentage) used in expressing the percentage increase in the Company's
Earnings from Operations in that fiscal year as compared with the Company's
Earnings from Operations in the immediately preceding fiscal year minus [*]
(i.e., if the percentage increase is [*], Z would be [*]). Z shall in no event
exceed [*] or be less than 0.

By way of illustration, if the Company's Earnings from Operations in fiscal
year 1 is $[*] and its Earnings from Operations in fiscal year 2 is $[*], Z
would be [*] (representing the percentage increase in Earnings from Operations
from fiscal year 1 to fiscal year 2 minus [*]). In such case, Executive's
Second Tier Bonus in respect of fiscal year 2 would be $[*].

___________________________

2
<PAGE> 3
2. PERFORMANCE BONUS. With respect to each Award Year in which the
Company's Earnings from Operations equal or exceed [*] in the immediately
preceding fiscal year, Executive shall be entitled to a Performance Bonus in an
amount equal to the sum of (i) $200,000 plus (ii) if the Company's Earnings
from Operations in that fiscal year exceed [*] in the immediately preceding
fiscal year, the First Tier Bonus (determined in accordance with the Section
1(c) above) plus (iii) if the Company's Earnings from Operations in that fiscal
year exceed [*], the Second Tier Bonus (determined in accordance with Section
1(d) above). The Performance Bonus payable to Executive in respect of any
Award Year shall in no event exceed $2,000,000. No Performance Bonus shall be
payable in respect of any Award Year in which the Company's Earnings from
Operations do not equal or exceed [*] in the immediately preceding fiscal year.
The determination of the amount of the Performance Bonus (the "Bonus
Determination") payable to Executive in respect of any Award Year covered by
the Plan shall be made by the Compensation Committee based upon the audited
financial statements of the Company with respect to such Award Year. The Bonus
Determination shall be made by the Compensation Committee at its first
regularly scheduled meeting after the audited financial statements of the
Company are available to the Board of Directors. The Performance Bonus so
determined shall be payable to Executive in a single lump sum no later than
fifteen days after the Bonus Determination is made. The Bonus Determination
shall be final, conclusive and binding for all purposes.

3. PARTIAL YEARS. Executive's Performance Bonus shall be reduced
proportionately in respect of any fiscal year in which Executive is not
employed by the Company for the entire fiscal year, except that no Performance
Bonus shall be payable to Executive in respect of any fiscal year in which his
employment by the Company is terminated for cause. The provisions hereof
notwithstanding, the termination of Executive's employment by the Company for
any reason shall not affect the Performance Bonus otherwise payable to him
under the Plan in respect of any fiscal year preceding the fiscal year in which
such termination occurs. The Executive shall not be entitled to receive any
Performance Bonus in respect of any period after he ceases being employed by
the Company for any reason.

_______________________

3
<PAGE> 4
4. ADMINISTRATION. (a) The Plan shall be administered and interpreted by
the Compensation Committee; provided, however, that, notwithstanding any other
provision of the Plan that might appear to provide to the contrary, the Plan
shall be operated in such manner that awards paid pursuant to the Plan shall be
fully tax-deductible by the Company pursuant to the exception for qualified
performance-based compensation provided for under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). All determinations of
the Compensation Committee in respect of the interpretation and administration
of the Plan shall be final, conclusive and binding for all purposes. In making
any such determinations, the Committee shall be entitled to rely on opinions,
reports or statements of officers or employees of the Company and of counsel,
public accountants and other professional experts and persons. The Committee
may adopt such rules as it may deem appropriate regarding the withholding of
taxes on payments to the Executive.

(b) The Plan shall be governed by the laws of the State of New York and
applicable Federal law.

5. EFFECTIVE DATE; APPLICATION. The Plan shall become effective as of May
1, 1995, subject to approval by the Company's stockholders entitled to vote
thereon. The Plan shall apply to each fiscal year of the Company during the
five year period beginning on the effective date of the Plan.

6. ADJUSTMENTS. In order to assure the incentive features of the Plan and
to avoid distortion in the operation of the Plan, the Committee may make
adjustments in the performance criteria in respect of any Award Year whether
before or after the end of such Award Year to compensate for or reflect any
extraordinary changes which may have occurred during the Award Year or the
immediately preceding fiscal year which alter the basis upon which performance
levels were determined or to comply with government regulations. Such changes
include the following: extraordinary operating results, accounting changes, and
the impact of material events that have been publicly disclosed.
Notwithstanding anything to the contrary, the Committee shall not make any
adjustment which would increase the award to the Executive if such adjustment
would render any amount payable to Executive nondeductible under Section 162(m)
of the Code.

7. NO RIGHT TO EMPLOYMENT. The Plan shall not confer upon the Executive
any right to continue in the employ of the Company or affect in any way the
right of the Company to terminate Executive's employment at any time.

8. CERTIFICATION BY COMMITTEE. The Committee must certify that performance
thresholds have been satisfied before any payments may be made under the Plan.

<PAGE> 1
Exhibit 7

SHOREWOOD PACKAGING CORPORATION
1993 INCENTIVE PROGRAM
AS AMENDED MAY 4, 1995

The 1993 Incentive Program, as amended (the "Program") of Shorewood
Packaging Corporation (the "Company") authorizes the Compensation and Stock
Option Committee of the Board of Directors (the "Committee") to provide
officers, directors, key executives, employees, consultants and advisors of the
Company and its direct or indirect subsidiaries with certain rights to acquire
shares of the Company's common stock (the "Common Stock"). The Company
believes that this Program will cause those persons to contribute materially to
the growth of the Company, thereby benefitting its stockholders.

1. ADMINISTRATION.

The Program shall be administered and interpreted by a
Committee or Committees consisting of not less than two persons appointed by
the Board of Directors of the Company from among its members. The Board may
appoint different Committees to handle different administrative duties under
the Program. The Committee or Committees with respect to directors and
officers subject to the reporting requirements of Section 16 (the "Reporting
Persons") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), must be constituted in such manner as to permit the
Program and transactions thereunder to comply with Rule 16b-3 under the
Exchange Act. The Committee shall determine the fair market value of the
Common Stock for purposes of the Program in accordance with the provisions of
Section 10(i) hereof. Subject to the requirements of Rule 16b-3 under the
Exchange Act, the decisions of the Board of Directors or Committee designated
by the Board of Directors shall be final and conclusive with respect to the
interpretation and administration of the Program and any grant made under it.

2. GRANTS.

Grants under the Program shall consist of incentive stock
options, non-qualified stock options, stock appreciation rights in tandem with
stock options or freestanding, restricted stock grants, and Restored Options
(any of the foregoing, in any combination, collectively, "Grants"). All Grants
shall be subject to the terms and conditions set forth herein and to such other
terms and conditions consistent with this Program as the Committee deems
appropriate. The Committee shall approve the form and provisions of each
Grant. Grants under a particular section of the Program need not be uniform,
and Grants under two or more sections may be combined in one instrument.

3. ELIGIBILITY FOR GRANTS.

Grants may be made to any employee of the Company or any of
its subsidiaries who is an officer or other key executive, director,
professional or administrative employee or a consultant or advisor to the
Company or any of its subsidiaries ("Eligible Employee"). The Committee shall
select the persons to receive Grants ("Grantees") from among the Eligible
Employees and determine the number of shares subject to any particular Grant.

<PAGE> 2
4. SHARES AVAILABLE FOR GRANT.

(a) Shares Subject to Issuance or Transfer. Subject to
adjustment as provided in Section 4(b), the aggregate number of shares of
Common Stock (the "Shares") that may be issued or transferred under the Program
is 1,000,000 Shares, plus 10% of any increase (excluding any increase relating
to or arising out of the conversion or exercise of any convertible securities,
options or warrants issued and outstanding as of the date the Program was
adopted by the Board) in the number of shares issued and outstanding over the
number of Shares issued and outstanding on the date the Program was adopted by
the Board (the "Incremental Amount"). The Shares may be authorized but
unissued Shares or treasury Shares. The number of Shares available for Grants
at any given time shall be reduced by the aggregate of all Shares previously
issued or transferred plus the aggregate of all Shares which may become subject
to issuance or transfer under then-outstanding and then-currently exercisable
Grants. For purposes of this Section 4, the number of shares outstanding at
any time shall not include Grants under the Program but shall include Shares
issuable under Substituted Stock Incentives (as defined in Section 10(b) below)
assumed by the Company upon or in connection with the acquisition of a merger
with another corporation.

(b) Recapitalization Adjustment. If any subdivision or
combination of shares of Common Stock or any stock dividend, capital
reorganization, recapitalization, consolidation, or merger in which the Company
is the surviving corporation occurs after the adoption of the Program, the
Committee shall make such proportional adjustments as it determines appropriate
in the number of shares of Common Stock that may be issued or transferred
thereafter under Section 4(a) or 8. The Committee shall similarly adjust the
number of Shares subject to such stock option and option price in all
outstanding Grants made before the event within 60 days of the event.

5. STOCK OPTIONS.

The Committee may grant options qualifying as incentive stock
options ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options ("NQOs") not entitled to
special tax treatment under the Code or Restored Options (collectively, "Stock
Options"). The following provisions are applicable to Stock Options (other
than Director Options).

(a) Exercise of Option. A Grantee may exercise a Stock
Option by delivering a notice of exercise to the Company, either with or
without accompanying payment of the option price. The notice of exercise, once
delivered, shall be irrevocable.

(b) Satisfaction of Option Price. The Grantee shall pay
the option price (the "Option Price") in cash, or with the Committee's
permission, by delivering shares of Common Stock already owned by the Grantee,
held by the Grantee for a minimum of six (6) months and having a Fair Market
Value on the date of exercise equal to the Option Price, or a combination of
cash and Shares. The Grantee shall pay the Option Price not later than thirty
(30) days after the date of a statement from the Company following exercise
setting forth the Option Price, Fair Market Value of Common Stock on the
exercise date, the number of Shares that may be delivered in payment of the
Option Price, and the amount of withholding tax due, if any. If the Grantee
fails to pay the Option Price within the period and in the manner prescribed in
the specific instrument of Grant, the Committee shall have the right to take
whatever action it deems appropriate, including voiding the option exercise.
The Company shall not issue or transfer Shares upon exercise of a Stock Option
until the Option Price is fully paid. The Committee may prescribe such other
or different exercise or payment terms as it may deem appropriate.

2
<PAGE> 3
(c) Price; Term and Conditions. The exercise price per
share, term and other provisions of stock options granted hereunder shall be
specified by the grant, as limited, in the case of ISOs, by the provisions of
paragraph (d) below. In addition, the Committee may prescribe such other
conditions as it may deem appropriate, which conditions shall be specified by
the Grant.

(d) Limits on the ISOs. The aggregate fair market value
of the stock covered by ISOs granted under the Program or any other stock
option plan of the Company or any subsidiary or parent of the Company that
becomes exercisable for the first time by any Grantee in any calendar year
shall not exceed $100,000. The aggregate Fair Market Value will be determined
at the time of grant. The period of exercise of an ISO shall not exceed ten
(10) years from the date of Grant (or five (5) years if the Grantee is also a
10% stockholder). The price at which Common Stock may be purchased by the
Grantee under an Incentive Stock Option shall be the Fair Market Value (or 110%
of the Fair Market Value if the Grantee is a 10% stockholder) of Common Stock
on the date of the Grant.

(e) Restored Options. Stock Options granted under the
Program may, with the Committee's permission, include the right to acquire a
restored option (a "Restored Option"). If a Stock Option grant contains a
Restored Option and if a Grantee pays all or part of the Option Price of the
Stock Option with shares of Common Stock held by the Grantee, then upon
exercise of the Stock Option the Grantee shall be granted a Restored Option to
purchase, at the fair market value as of the date of the grant of the Restored
Option, the number of shares of Common Stock of the Company equal to the sum of
the number of whole shares used by the Grantee in payment of the Option Price
and the number of whole shares, if any, withheld by the Company as payment for
withholding taxes. A Restored Option may be exercised between the date of
grant and the date of expiration, which will be the same as the date of
expiration of the Stock Option to which a Restored Option is related.

6. STOCK APPRECIATION RIGHT.

The Committee may grant a Stock Appreciation Right ("SAR")
either independently or in conjunction with any Stock Option granted under the
Program either at the time of grant of the option or thereafter. The following
provisions are applicable to each SAR:

(a) Options to Which Right Relates. Each SAR which is
issued in conjunction with a Stock Option shall specify the Stock Option to
which the SAR is related, together with the Option Price and number of option
shares subject to the SAR at the time of its grant.

(b) Requirement of Employment. Each SAR may be exercised
only while the Grantee is in the employment of the Company, provided that the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.

(c) Exercise. A Grantee may exercise each SAR in whole or
in part by delivering a notice of exercise to the Company, except that the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.

(d) Payment and Form of Settlement. If a Grantee
exercises any SAR which is issued in conjunction with a Stock Option, the
grantee shall receive the aggregate of the excess of the fair market value of
each share of Common Stock with respect to which the SAR is being exercised
over the Option Price of each such share. Payment, in any event, may be made in
cash, Common Stock or a combination of the two, in the discretion of the
Committee. Fair Market Value shall be determined as of the date of exercise.

3
<PAGE> 4
(e) Expiration and Termination. Each SAR shall expire on
a date determined by the Committee at the time of grant. If a Stock Option is
exercised in whole or in part, any SAR related to the Shares purchased in
connection with such exercise shall terminate immediately.

7. RESTRICTED STOCK GRANTS.

The Committee may issue or transfer Shares ("Restricted
Stock") to a Grantee under a Restricted Stock Grant. Upon the issuance or
transfer, the Grantee is entitled to vote the Shares and to receive any
dividends paid. The following provisions are applicable to Restricted Stock
Grants:

(a) Requirement of Employment. If the Grantee's
employment terminates during the period designated in the Grant as the
"Restriction Period", the Restricted Stock Grant terminates and the shares of
Common Stock must be returned immediately to the Company. However, the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.

(b) Restrictions of Transfer and Legend on Stock
Certificate. During the Restriction Period, a Grantee may not sell, assign,
transfer, pledge, or otherwise dispose of the Shares of Restricted Stock except
to a Successor Grantee under Section 10(a). Each certificate for shares issued
or transferred under a Restricted Stock Grant shall contain a legend giving
appropriate notice of the restrictions applicable to the Grant.

(c) Lapse of Restrictions. All restrictions imposed
under any Restricted Stock Grant shall lapse upon the fulfillment of the
conditions for vesting set forth in the instrument of Grant provided that all
of the conditions stated in Sections 7(a) and (b) have been met as of the date
of such lapse. The Grantee shall then be entitled to have the legend removed
from the certificate.

8. DIRECTOR STOCK OPTIONS.

(a) Eligible Directors. This Section 8 provides for the
automatic Grant of NQOs (the "Director Options") to directors of the Company
who are neither employees nor officers of the Company or any of its
subsidiaries (the "Eligible Directors"). All powers vested in the Committee in
respect of the administration and interpretation of the Program and the Grants
made under it shall, solely in respect of this Section 8, be vested in an
alternate committee appointed by the Board (the "Alternate Committee")
consisting of two or more directors not eligible to receive Director Options.
All terms and conditions of Director Options not specifically set forth in this
Section 8 shall be determined by the Alternate Committee.

(b) Shares Subject to Issuance or Transfer. Subject to
adjustment as provided in Section 4(b), the aggregate number of Shares that may
be issued or transferred under Section 8 of the Program is up to, but not in
excess of, 100,000, plus 10% of any Incremental Amount.

(c) Non-Qualified Options. All options granted under this
Section 8 shall be NQOs not entitled to special tax treatment under Section 422
of the Code.

(d) Grant of Options. Director Options shall be granted
automatically on the date of adoption of the Program by the stockholders of the
Company and on January 2 (or if January 2 is not a business day, on the next
succeeding business day) of each calendar year following the year in which this
Program is adopted (each, a "Program Year"). The number of Shares subject to
Director Options

4
<PAGE> 5
granted pursuant to this Section 8 to any Eligible Director shall be equal to
the nearest number of whole shares determined in accordance with the following
formula:

Annual Retainer Number
-------------------------------- = of
Fair Market Value - $_____ Shares

"Annual Retainer" shall mean the dollar amount set by the Board for the
relevant Program Year, prior to the commencement of such Program Year, and
shall include all fees for attendance at meetings of the Board or any committee
of the Board or for any other services to be provided to the Company. The
Annual Retainer may be zero in any year. "Fair Market Value" shall mean the
Fair Market Value of the Common Stock on January 2 of the applicable year,
determined in accordance with Section 10(i) hereof. Notwithstanding the
foregoing, the maximum number of Shares subject to Director Options granted in
any year pursuant to this Section 8 shall not exceed 10,000 per director. The
exercise price of the Shares subject to Director Options shall be equal to the
Fair Market Value of the Common Stock on the date of grant of the Director
Options. The amount, price and timing of awards of Director Options are fixed
by the terms of this paragraph and are not intended to be subject to the
discretion of any person or committee. The award of Director Options is not
intended to preclude the Company from awarding other compensation to Eligible
Directors outside of the Program for attendance at meetings of the Board or any
committee of the Board or for any other services provided or to be provided to
the Company.

(e) Terms. Director Options shall become exercisable
over five (5) years from the date of grant with installments of 20% of the
total number of underlying shares vesting on each of the first five (5)
anniversaries of the date of grant; provided, however, that Director Options
shall become exercisable in full for a period of 90 days following (i) the
death of the Grantee director or retirement from the Board because of total and
permanent disability, or (ii) a Change in Control of the Company (as that term
is defined in Section 10(j)).

(f) Exercise of Director Options. A Director Option
shall be exercised by delivering a notice of exercise to the Company,
accompanied by a certified check in the amount of, or Shares of Common Stock
already owned by the Grantee, held by the Grantee for a minimum of six (6)
months and having a Fair Market Value on the date of exercise equal to, the
aggregate amount of the exercise price. If the Grantee fails to comply with
this paragraph, the Alternate Committee shall have the right to take such
action as it deems appropriate, including voiding the option exercise. The
Company shall not issue or transfer Shares of Common Stock upon exercise of a
Director Option until the exercise price has been paid in full.

(g) Termination. All rights of an Eligible Director
in a Director Option, to the extent that they have not been previously
exercised, shall terminate upon the expiration of ten (10) years from the date
of grant or, if sooner, two (2) years after such director's termination as a
director of the Company for any reason, except that, if a director is removed
for cause, all of his Director Options then outstanding hereunder shall
terminate immediately upon such removal. Notwithstanding the foregoing, if an
Eligible Director dies during his tenure on the Board, all of his Director
Options then outstanding shall terminate upon the failure of his designated
representative to exercise said options within the time period provided in
Section 8(e). In the event that an Eligible Director ceases to be a member of
the Board for any reason, the number of Shares subject to the Director Option
issued to him or her in respect of the Program Year in which such termination
occurs shall, effective as of the date of such termination, be reduced in the
same proportion that the unearned portion of such Director's Annual Retainer
for the relevant Program Year bears to the aggregate Annual Retainer set by the
Board for that Program Year.

5
<PAGE> 6
(h) Death of Director. Any Director Option granted
to an Eligible Director under this Section 8 and outstanding on the date of
such director's death may be exercised by the personal representative of the
deceased director or the person or persons to whom the Option shall have been
transferred by the director's will in accordance with the laws of descent and
distribution at any time prior to the termination of such Option in accordance
with the terms of Section 8(g).

(i) Restriction on Amendments. Notwithstanding anything
to the contrary contained in this Program, the provisions of Section 8 shall
not be amended more than once every 6 months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.

9. AMENDMENT AND TERMINATION OF THE PROGRAM.

(a) Amendment. Subject to Section 8(i) above, the Board
of Directors may amend the Program except that it may not, with respect to ISOs
granted hereunder, (i) increase the maximum number of Shares in the aggregate
which may be sold pursuant to such options granted hereunder; (ii) change the
manner of determining the minimum option prices, other than to change the
manner of determining the fair market value of any Shares underlying the option
to conform to any than applicable provisions of the Code or regulations
thereunder, (iii) increase the periods during which such options may be granted
or exercised or (iv) change the employees or class of employees eligible to
receive such options hereunder. In any event, no termination, suspension,
modification or amendment of the Program may adversely affect the rights of any
Grantee without his consent.

(b) Termination of the Program. The Program shall
terminate on the tenth anniversary of its effective date unless terminated
earlier by the Board or unless extended by the Board.

(c) Termination and Amendment of Outstanding Grants. A
termination or amendment of the Program that occurs after a Grant is made shall
not result in the termination or amendment of the Grant unless the Grantee
consents or unless the Committee acts under Section 10(e). The termination of
the Program shall not impair the power and authority of the Committee with
respect to outstanding Grants. Whether or not the Program has terminated, an
outstanding Grant may be terminated or amended under Section 10(e) or may be
amended by agreement of the Company and the Grantee consistent with the
Program.

10. GENERAL PROVISIONS.

(a) Prohibitions Against Transfer. Only a Grantee or his
authorized representative may exercise rights under a Grant. Except as
provided herein, a Grantee may not transfer rights under a Grant, except upon
the express written consent of the Company, which may be granted or denied in
the Company's discretion. Except as otherwise expressly provided herein or in
the instrument of grant, when a Grantee dies, the personal representative or
other person entitled under a prior Stock Option or a Grant under the Program
to succeed to the rights of the Grantee ("Successor Grantee") may exercise the
rights. A Successor Grantee must furnish proof satisfactory to the Company of
his or her right to receive the Grant under the Grantee's will or under the
applicable laws of descent and distribution.

(b) Substitute Grants. The Committee may make a Grant (a
"Substitute Grant") to an employee of another corporation who becomes an
Eligible Employee by reason of a corporate merger, consolidation, acquisition
of stock or property, reorganization or liquidation involving the Company in

6
<PAGE> 7
substitution for a stock option, stock appreciation right, performance award,
or restricted stock grant granted by such corporation ("Substituted Stock
Incentive"). The terms and conditions of the Substitute Grant may vary from
the terms and conditions required by the Program and from those of the
Substituted Stock Incentive. The Committee shall prescribe the exact
provisions of the Substitute Grant, preserving where possible the provisions of
the Substitute Stock Incentive. The Committee shall also determine the number
of shares of Common Stock to be taken into account under Section 4.

(c) Subsidiaries. The term "subsidiary" means an
affiliated corporation controlled by the Company directly or indirectly through
one or more intermediaries.

(d) Fractional Shares. Fractional shares shall not be
issued or transferred under a Grant, but the Committee or Alternate Committee
may pay cash in lieu of a fraction or round the fraction.

(e) Compliance with Law. The Program, the exercise of
Grants, and the obligations of the Company to issue or transfer shares of
Common Stock under Grants shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be required. The
Committee or Alternate Committee may revoke any Grant if it is contrary to law
or modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payment to Grantees.

(f) Ownership of Stock. A Grantee or Successor Grantee
shall have no rights as a stockholder of the Company with respect to any Shares
covered by a Grant until the Shares are issued or transferred to the Grantee or
Successor Grantee on the Company's books.

(g) No Right to Employment. The Program and the Grants
under it shall not confer upon any Grantee the right to continue in the
employment of the Company or affect in any way the right of the Company to
terminate the employment of a Grantee at any time.

(h) Effective Date of the Program. The Program shall
become effective upon its approval by the Company's stockholders entitled to
vote thereon.

(i) Fair Market Value. For the purposes of the Program,
the term "Fair Market Value" means, as of any date, the closing price of a
share of Common Stock of the Company on such date. The closing price shall be
(i) if the Common Stock is then listed or admitted for trading on any national
securities exchange or, if not so listed or admitted for trading, is listed or
admitted for trading on the Nasdaq National Market, the last sale price of the
common stock, regular way, or the mean of the bid and asked prices thereof for
any trading day on which no such sale occurred, in each case as officially
reported on the principal securities exchange on which the common stock is
listed or admitted for trading or on the Nasdaq National Market, as the case
may be, or (ii) if not so listed or admitted for trading on a national
securities exchange or the Nasdaq National Market, the mean between the closing
high bid and low asked quotations for the Common Stock in the over-the-counter
market as reported by Nasdaq, or any similar system for the automated
dissemination of securities prices then in common use, if so quoted, as
reported by any member firm of the New York Stock Exchange selected by the
Company; provided, however, that if, by reason of extended or continuous
trading hours on any exchange or in any market or for any other reason, the
time, with respect to any trading day, of the close of trading for the purpose
of determining the "last sale price" or the "closing" bid and asked prices is
not objectively determinable, the time on such trading day used for the purpose
of reporting any compilation of last sale prices or

7
<PAGE> 8
closing bid and asked prices in The Wall Street Journal shall be the time on
such trading day as of which the "last sale price" or "closing" bid and asked
prices are determined for purposes of this definition. If the Common Stock is
quoted on a national securities or central market system in lieu of a market or
quotation system described above, the closing price shall be determined in the
manner set forth in clause (i) of the preceding sentence if actual transactions
are reported, and in the manner set forth in clause (ii) of the preceding
sentence if bid and asked quotations are reported but actual transactions are
not. If on the date in question, there is no exchange or over-the-counter
market for the Common Stock, the "fair market value" of such Common Stock shall
be determined by the Committee acting in good faith.

(j) Change in Control. For purposes of the Program, the
term "Change of Control" means: the acquisition, without the approval of the
Board, by any person or entity, other than the Company and certain related
entities, of more than 20% of the outstanding shares of Common Stock through a
tender offer, exchange offer, or otherwise; the liquidation or dissolution of
the Company following a sale or other disposition of all or substantially all
of its assets; a merger or consolidation involving the Company that results in
the Company not being the surviving parent corporation; or a change in the
majority of the members of the Board during any two-year period that is not
approved by at least two-thirds of the members of the Board who were members at
the beginning of the two year period.

(k) Withholding. The Committee may, in its discretion
and subject to such rules as it may adopt, permit or require a Grantee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the distribution to him or her of Shares of Common Stock or
cash pursuant to the Program by authorizing the Company to withhold from such
distribution cash or Shares having a Fair Market Value equal to the amount of
the withholding tax. Notwithstanding the foregoing, the Committee shall
require, as a condition to the distribution of any cash or Shares of Common
Stock to any Reporting Person, that the Company withhold from such distribution
cash or Shares having an aggregate Fair Market Value equal to the amount of the
Grantee's liability for any and all taxes required by law to be withheld.

(l) Further Restrictions Applicable to Reporting Persons.
Common Stock acquired by a Reporting Person pursuant to the Program shall in no
event be transferable until six (6) months have elapsed from the date of Grant
of the Common Stock or, in the case of Shares acquired pursuant to a stock
option awarded under the Program, at least six (6) months have elapsed from the
date of Grant of the stock option to the date of disposition of the Common
Stock underlying such option.

(m) Program Controls. In the case of any conflict
between the term of this Program and the terms of any instrument of Grant, the
terms of this Program will control.

<PAGE> 1
Exhibit 8

RIGHTS AGREEMENT

__________________________________

SHOREWOOD PACKAGING CORPORATION

AND

THE BANK OF NEW YORK

RIGHTS AGENT

__________________________________

DATED AS OF JUNE 12, 1995
<PAGE> 2
INDEX

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 2. Appointment of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 3. Issue of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 4. Form of Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Section 5. Countersignature and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost
or Stolen Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Section 8. Cancellation and Destruction of Right
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Section 9. Reservation and Availability of Shares of
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Section 10. Preferred Stock Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Section 12. Certificate of Adjusted Purchase Price or Number
of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Section 14. Fractional Rights and Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Section 16. Agreement of Right Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Section 17. Right Certificate Holder Not Deemed a
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Section 18. Concerning the Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Section 19. Merger or Consolidation or Change of Name of
Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>

(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Section 22. Issuance of New Right Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Section 23. Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Section 25. Notice of Proposed Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Section 26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 29. Benefits of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 30. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 31. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Section 32. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Section 33. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Exhibit A - Form of Articles Supplementary for
Series A Junior Participating
Preferred Stock

Exhibit B - Form of Right Certificate
</TABLE>

(ii)
<PAGE> 4
RIGHTS AGREEMENT

This Agreement, dated as of June 12, 1995 is entered into
between SHOREWOOD PACKAGING CORPORATION, a Delaware corporation (the "Company")
and THE BANK OF NEW YORK, a New York banking corporation (the "Rights Agent").

W I T N E S S E T H

WHEREAS, on May 4, 1995 the Board of Directors of the Company
authorized and declared a dividend distribution of one right (hereinafter
referred to as a "Right") for each share of Common Stock, par value $.01 per
share, of the Company outstanding at the close of business on June 14, 1995
(the "Record Date"), (other than shares of such Common Stock held in the
Company's treasury on such date) and has authorized the issuance of one Right
in respect of each share of Common Stock of the Company issued between the
Record Date (whether originally issued or issued from the Company's treasury)
and the Distribution Date (as such term is defined in Section 3 hereof), each
Right representing the right to purchase one one-hundredth of a share of Series
B Junior Participating Preferred Stock of the Company having the rights, powers
and preferences set forth in the form of Certificate of Designation attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter
set forth (the "Rights"); and

WHEREAS, the Company desires to appoint the Rights Agent to
act as provided herein, and the Rights Agent is willing to so act;

NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:

Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:

(a) "Acquiring Person" shall mean any Person (as
hereinafter defined) who or which, together with all Affiliates (as hereinafter
defined) and Associates (as hereinafter defined) of such Person, (i) without
the prior written approval of a majority of the Board of Directors, shall be
the Beneficial Owner (as hereinafter defined) of securities of the Company
constituting 25% or more of the Voting Power (as hereinafter defined) of the
Company or was such a Beneficial Owner at any time after the date hereof,
whether or not such Person continues to be the Beneficial Owner of securities
representing 25% or more of the Voting Power of the Company, or (ii) who with
the prior written approval of the Board of Directors shall be the Beneficial
Owner (as hereinafter defined) of securities of the Company constituting 25% or
more of the Voting Power (as hereinafter defined) of the Company, and who
without the prior written approval of the Company acquires additional Voting
Power of the Company in an amount equal to 1% or more; but an Acquiring Person
shall not include (i) the Company, any Subsidiary
<PAGE> 5

of the Company, any employee benefit plan or compensation arrangement of the
Company or any Subsidiary of the Company, or any entity holding securities of
the Company to the extent organized, appointed or established by the Company or
any Subsidiary of the Company for or pursuant to the terms of any such employee
benefit plan or compensation arrangement or (ii) any Person who or which,
together with all Affiliates and Associates of such Person, inadvertently may
become the Beneficial Owner of securities of the Company representing 25% or
more of the Voting Power of the Company or otherwise becomes such a Beneficial
Owner without a plan or intention to acquire control of the Company, so long as
such Person, individually or together with the Affiliates and Associates of such
Person, promptly enters into an irrevocable commitment promptly to divest, and
thereafter promptly divests (without exercising or retaining any power,
including voting, with respect to such securities), sufficient securities of the
Company so that such Person, together with all Affiliates and Associates of such
Person, ceases to be the Beneficial Owner of 25% or more of the Voting Power of
the Company. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of voting securities of the
Company by the Company which, by reducing the amount of such securities
outstanding, increases the proportionate voting power of such securities
beneficially owned by such Person to 25% or more of the Voting Power; provided,
however, that if a Person becomes the Beneficial Owner of securities
constituting 25% or more of the Voting Power by reason of purchases by the
Company and shall, after such purchases by the Company, become the Beneficial
Owner of any additional voting securities of the Company without the prior
written approval of a majority of the Board of Directors, then such Person shall
be deemed to be an Acquiring Person.

(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof.

(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly as
determined pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act, as in effect on the date hereof;

(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of

-2-
<PAGE> 6
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise, provided,
however, that a Person shall not be deemed the "Beneficial Owner" of securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for payment or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding, provided, however,
that a Person shall not be deemed the "Beneficial Owner" of any security under
this clause (B) if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given in response
to a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations under the Exchange Act and (2) is
not also then reportable by such person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or

(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy or
consent as described in clause (B) of subparagraph (ii) of this paragraph (c))
or disposing of any securities of the Company.

Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and outstanding
which such Person would be deemed to own beneficially hereunder.

(d) "Board of Directors" shall mean the Board of
Directors of the Company as constituted from time to time.

(e) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.

(f) "Close of business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.

(g) "Common Stock" shall mean the Common Stock, par value
$.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock
with the greatest Voting Power of such Person or the equity securities or other
equity interest having

-3-
<PAGE> 7
power to control or direct the management of such Person or, if such Person is
a Subsidiary (as hereinafter defined) of another Person, of the Person (other
than an individual or group of individuals) which ultimately controls such
first-mentioned Person and which has issued and outstanding such capital stock,
equity securities or equity interests.

(h) "Distribution Date" shall have the meaning set forth
in Section 3 hereof.

(i) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.

(j) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.

(k) "Person" shall mean any individual, firm,
corporation, partnership, limited partnership, limited liability company,
trust, or other entity, and shall include any successor (by merger or
otherwise) of any such entity.

(l) "Preferred Stock" shall mean the Series B Junior
Participating Preferred Stock, par value $10.00 per share, of the Company.

(m) "Purchase Price" shall have the meaning set forth in
Section 4 hereof.

(n) "Redemption Price" shall have the meaning set forth
in Section 23(a) hereof.

(o) "Section 11(b) Event" shall have the meaning set
forth in Section 11(b) hereof.

(p) "Section 13 Event" shall mean an event described in
clauses (x), (y) or (z) of Section 13(a) hereof.

(q) "Stock Acquisition Date" shall mean the earlier of
(i) the first date of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become an Acquiring Person, or (ii) the date on
which the Company first has notice, direct or indirect, or otherwise determines
that a Person has become an Acquiring Person.

(r) "Subsidiary" shall mean, with respect to any Person,
any other Person of which securities or other ownership interests having
ordinary Voting Power, in the absence of contingencies, to elect a majority of
the board of directors (or other persons performing similar functions) of such
other Person are at the time directly or indirectly owned by such Person or one
or more of such Person's Subsidiaries, except that "Subsidiary" when used with
reference to the Company shall mean any Person of which either a majority of
the Voting Power of the voting equity securities or a

-4-
<PAGE> 8
majority of the equity interests is owned, directly or indirectly, by the
Company.

(s) "Voting Power" shall mean the voting power of all
securities of a Person then outstanding generally entitled to vote for the
election of directors of the Person (or, where appropriate, for the election of
persons performing similar functions).

Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents
as it may deem necessary or desirable upon ten (10) days' prior written notice
to the Rights Agent. The Rights Agent shall have no duty to supervise, and
shall in no event be liable for, the acts or omissions of any such Co-Rights
Agent. In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agents and any Co-Rights Agents shall be as the
Company shall determine.

Section 3. Issue of Right Certificates.

(a) Until the earlier of (i) the close of business on the
tenth Business Day after the Stock Acquisition Date or (ii) the close of
business on the tenth Business Day (or such later date as may be determined by
action of the Board of Directors but in no event later than such time as any
Person becomes an Acquiring Person) after the date that a tender or exchange
offer by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan or compensation arrangement of the Company or of any
Subsidiary of the Company, or any entity holding securities of the Company to
the extent organized, appointed or established by the Company or any Subsidiary
of the Company for or pursuant to the terms of any such employee benefit plan
or compensation arrangement) is first published or sent or given within the
meaning of Rule l4d-2(a) of the General Rules and Regulations under the
Exchange Act, without the prior written approval of a majority of the Board of
Directors, which tender or exchange offer would result in any Person becoming
the Beneficial Owner of Voting Power aggregating 25% or more of the outstanding
Voting Power (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (A) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
Right Certificates) and not by separate Right Certificates, as more fully set
forth below, and (B) the Rights (and the right to receive certificates
therefor) will be transferable only in connection with the transfer of the
underlying shares of Common Stock, as more fully set forth below. As soon as
practicable after the Company has notified the Rights Agent of the occurrence
of the Distribution Date, the Company shall

-5-
<PAGE> 9
prepare and execute, and the Rights Agent shall countersign and send, at the
Company's expense by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution
Date, at the address of such holder shown on the records of the Company, a
right certificate, in substantially the form of Exhibit B hereto (the "Right
Certificate"), evidencing one Right for each share of Common Stock so held. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.

(b) With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date (or the earlier
redemption, expiration or termination of the Rights), the Rights will be
evidenced by such certificates for the Common Stock registered in the names of
the holders of the Common Stock and the registered holders of the Common Stock
shall also be registered holders of the associated Rights. Until the
Distribution Date (or the earlier redemption, expiration or termination of the
Rights), the surrender for transfer of any of the certificates for the Common
Stock outstanding in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.

(c) Certificates for the Common Stock issued after the
Record Date but prior to the earlier of the Distribution Date or the
redemption, expiration or termination of the Rights shall be deemed also to be
certificates for Rights and shall have impressed, printed or written on, or
otherwise affixed to them the following legend:

This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
Shorewood Packaging Corporation (the "Company") and The Bank
of New York (the "Rights Agreement"), as it may from time to
time be supplemented or amended, the terms of which are
incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights may be redeemed, expire, exchanged or be evidenced
by separate certificates and no longer be evidenced by this
certificate. The Company will mail to the holder of record of
this certificate a copy of the Rights Agreement without charge
within five days after receipt of a written request therefor.
Under certain circumstances, Rights issued to or held by
Acquiring Persons or their Affiliates or Associates (as
defined in the Rights Agreement) and any subsequent holder of
such Rights may become null and void.

With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier redemption, expiration

-6-
<PAGE> 10
or termination of the Rights), the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.

In the event that the Company purchases or acquires any Common
Stock after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Stock shall be deemed cancelled and retired so that
the Company shall not be entitled to exercise any Rights associated with shares
of Common Stock which are no longer outstanding.

Section 4. Form of Right Certificates.

(a) The Right Certificates (and the forms of election to
purchase shares and of assignment to be printed on the reverse thereof) shall
be in substantially the same form as Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. The Right Certificates shall be in a machine printable format
and in a form reasonably satisfactory to the Rights Agent. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates,
whenever issued, shall be dated as of the Record Date, shall show the date of
countersignature, and on their face shall entitle the holders thereof to
purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price per one one-hundredth of a share as set
forth therein (the "Purchase Price"), but the number and identity of such
shares and the Purchase Price shall be and remain subject to adjustment as
provided in Sections 11, 13 and 22 hereof.

(b) Any Right Certificate issued pursuant to Section 3(a)
hereof that represents Rights beneficially owned by an Acquiring Person or any
Associate or Affiliate thereof and any Right Certificate issued at any time
upon the transfer of any Rights to an Acquiring Person or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate, and any Right Certificate issued pursuant to Section 6 hereof,
Section 11 hereof or Section 22 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:

The Rights represented by this Right Certificate were issued
to a Person who was an Acquiring Person or an Affiliate or an
Associate of an Acquiring Person. This Right Certificate and
the Rights represented hereby are

-7-
<PAGE> 11
void in the circumstances specified in Section 7(e) of the
Rights Agreement.

The failure to print the foregoing legend on any such Right Certificate or any
defect therein shall not affect in any manner whatsoever the application or
interpretation of the provisions of Section 7(e) hereof. The Company shall
instruct the Rights Agent in writing of the Rights which should be so legended
and shall supply the Rights Agent with such legended Right Certificates.

Section 5. Countersignature and Registration.

(a) The Right Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be countersigned manually or by
facsimile signature by an authorized signatory of the Rights Agent, Co-Rights
Agent or the registrar of the Company (the "Registrar"), which need not be the
same authorized signatory for all of the Right Certificates, and shall not be
valid for any purpose unless so countersigned. In case any officer of the
Company whose manual or facsimile signature is affixed to the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent or the Registrar and issuance and delivery
by the Company, such Right Certificates, nevertheless, may be countersigned by
the Rights Agent or the Registrar, issued and delivered with the same force and
effect as though the person who signed such Right Certificates had not ceased
to be such officer of the Company. Any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.

(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its office designated for such purpose, books
for registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates, the certificate number of each of the Right Certificates and the
date of each of the Right Certificates.

Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
Subject to the provisions of Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the Expiration Date (as such term is defined in Section 7(a) hereof), any Right
Certificate

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<PAGE> 12
or Right Certificates (other than Right Certificates representing Rights that
have become void pursuant to Section 7(e) hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of shares of
Preferred Stock as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent. Thereupon, the Rights Agent shall
countersign and deliver to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may
require payment by the holder of a Right Certificate of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.

Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.

(a) The registered holder of any Right Certificate may
exercise the Rights evidenced thereby (except as otherwise provided herein) in
whole or in part at any time after the Distribution Date upon surrender of the
Right Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the Purchase Price for
each one-one hundredth of a share of Preferred Stock as to which the Rights are
exercised, at or prior to the close of business on the Expiration Date. The
"Expiration Date", as used in this Agreement, shall be the earliest of (i) the
Final Expiration Date (as defined below), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof, or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof. The "Final Expiration
Date", as used in this Agreement, shall be June 14, 2005.

(b) The Purchase Price for each one one-hundredth of a
share of Preferred Stock pursuant to the exercise of a Right shall initially be
$17.00, shall be subject to adjustment from time to

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<PAGE> 13
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.

(c) Upon receipt of a Right Certificate, with the form of
election to purchase duly executed, accompanied by payment of the Purchase
Price for each one one-hundredth of a share of Preferred Stock to be purchased
and an amount equal to any applicable transfer tax required to be paid by the
holder of the Rights pursuant hereto in accordance with Section 9 hereof by
certified check, bank draft or money order payable to the order of the Company
or the Rights Agent, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) either (A) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent) certificates for the number of shares of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the shares of Preferred Stock issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a share of Preferred Stock as are to be purchased (in which
case certificates for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent)
and the Company will direct the depositary agent to comply with all such
requests, (ii) promptly after receipt of such certificates or depositary
receipts cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder, (iii) when appropriate, requisition from the Company
the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof, (iv) after receipt of any such cash,
promptly deliver such cash to or upon the order of the registered holder of
such Right Certificate, (v) when appropriate, requisition from the Company the
amount of cash or securities issuable upon exercise of a Right pursuant to the
adjustment provisions of Section 11 or the exchange provisions of Section 24,
and (vi) after receipt of any such cash or securities, promptly deliver such
cash or securities to or upon the order of the registered holder of such Right
Certificate, of any such cash or securities.

(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.

(e) Notwithstanding anything in this Agreement to the
contrary, upon the first occurrence of a Section 11(b) Event or a

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<PAGE> 14
Section 13 Event, any Rights that are or were at any time on or after the
earlier of the Stock Acquisition Date or the Distribution Date beneficially
owned by an Acquiring Person or any Associate or Affiliate of an Acquiring
Person shall become void with respect to the rights provided under Section
11(b), Section 13(a) and Section 24 hereof and any holder of such Rights shall
thereafter have no right to exercise such Rights under the provisions of
Section 11(b) and Section 13(a) hereof, or to receive any Common Stock in
exchange therefor pursuant to the provisions of Section 24 hereof.

(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless the certificate
contained in the appropriate form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise shall have
been properly completed and duly executed by the registered holder thereof and
the Company shall have been provided with such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.

Section 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this Rights
Agreement. The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Right
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all cancelled Right
Certificates to the Company.

Section 9. Reservation and Availability of Shares of
Preferred Stock.

(a) The Company covenants and agrees that it will cause
to be reserved and kept available out of its authorized and unissued shares of
Preferred Stock or its authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient
to permit the exercise in full of all outstanding Rights and, after the
occurrence of a Section 11(b) Event or a Section 13 Event, shall so reserve and
keep available a sufficient number of shares of Preferred Stock, Common Stock
and/or other securities which may be required to permit the exercise in full of
the Rights pursuant to this Agreement.

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<PAGE> 15

(b) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all shares of Preferred
Stock and/or other securities delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares or securities.

(c) The Company shall use its best efforts to (i) file,
as soon as practicable following the first occurrence of an event which would
establish the Distribution Date, a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date. The Company will also take such action as may be
appropriate under the securities offering and "Blue Sky" Laws of the various
states. The Rights Agent may assume that any Right exercised is permitted to
be exercised under applicable law and shall have no liability for acting in
reliance upon such assumption.

(d) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Right Certificates or of any shares of Preferred Stock and/or other securities
upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer involved
in the transfer or delivery of Right Certificates or the issuance or delivery
of certificates or depositary receipts for Preferred Stock and/or other
securities in a name other than that of the registered holder of the Right
Certificate evidencing Rights surrendered for exercise, nor shall the Company
be required to issue or deliver any certificates or depositary receipts for
shares of Preferred Stock and/or other securities upon the exercise of any
Rights until any such tax shall have been paid (any such tax being payable by
the holder of such Right Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.

Section 10. Preferred Stock Record Date. Each person (other
than the Company) in whose name any certificate for shares of Preferred Stock
(or other securities) is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Preferred Stock
(or other securities) represented thereby on, and such certificate shall be
dated, the date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the

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<PAGE> 16
Preferred Stock (or other securities) transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Stock (or other securities) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.

Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number and identity of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.

(a) In the event the Company shall at any time after the
date of this Agreement (i) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (ii) subdivide the outstanding Preferred Stock,
(iii) combine the outstanding Preferred Stock into a smaller number of shares
or (iv) issue any shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11, the Purchase
Price in effect at the time of the record date for such dividend or the time of
the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of capital stock, including Preferred Stock,
issuable upon exercise of a Right, shall be proportionately adjusted so that
the holder of any Right exercised after such time, upon payment of the
aggregate consideration such holder would have had to pay to exercise such
Right prior to such time, shall be entitled to receive the aggregate number and
kind of shares of capital stock, including Preferred Stock, which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification.

(b) In the event any Person shall become an Acquiring
Person ("Section 11(b) Event"), then proper provision shall be made so that
each holder of a Right, subject to Section 7(e) and Section 24 hereof and
except as provided below, shall after the later of the occurrence of such event
and the effective date of an appropriate registration statement pursuant to
Section 9 hereof, have a right to receive, upon exercise thereof at the then
current Purchase Price, multiplied by the then number of one- one hundredths of
a share of Preferred Stock for which a Right is then

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<PAGE> 17
exercisable, in accordance with the terms of this Agreement, in lieu of shares
of Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (A) multiplying the then-current Purchase
Price by the then number of one one-hundredths of a share of Preferred Stock
for which a Right is then exercisable and dividing that product by (B) 25% of
the current market price per one share of Common Stock (determined pursuant to
Section 11(f) hereof on the date of the occurrence of the Section 11(b) Event)
(such number of shares being referred to as the "number of Adjustment Shares").

(c) In the event that there shall not be sufficient
Treasury shares or authorized but unissued shares of Common Stock to permit the
exercise in full of the Rights in accordance with the foregoing Section 11(b),
and the Rights become so exercisable, notwithstanding any other provision of
this Agreement, to the extent necessary and permitted by applicable law and any
agreements in effect on the date hereof to which the Company is a party, each
Right shall thereafter represent the right to receive, upon exercise thereof at
the then current Purchase Price, multiplied by the then number of one-one
hundredths of a share of Preferred Stock for which a Right is then exercisable,
in accordance with the terms of this Agreement, a number of shares, or units of
shares, of (A) Common Stock, and (B) preferred stock (or other equity
securities) of the Company, including, but not limited to Preferred Stock, or
fractional shares of preferred stock of the Company equal in the aggregate to
the number of Adjustment Shares where the Board of Directors shall have in good
faith deemed such shares or units, other than the shares of Common Stock, to
have at least the same value and voting rights as the Common Stock (a "Common
Stock Equivalent"); provided, however, if there are unavailable (solely as a
result of an insufficient number having been authorized, and not as a result of
a delay in issuance, registration or otherwise) sufficient shares (or fractions
of shares) of Common Stock and/or Common Stock Equivalents, then the Company
shall take all such action as may be necessary to authorize additional shares
of Common Stock or Common Stock Equivalents for issuance upon exercise of the
Rights, including the calling of a meeting of shareholders; and provided,
further, that if the Company is unable to cause sufficient shares of Common
Stock and/or Common Stock Equivalents to be available for issuance upon
exercise in full of the Rights, then the Company, to the extent necessary and
permitted by applicable law and any agreements or instruments in effect on the
date thereof to which it is a party, shall make provision to pay an amount in
cash equal to the Cash Equivalent Amount, as defined below, in lieu of issuing
shares of Common Stock and/or Common Stock Equivalents. To the extent that the
Company determines that some action needs to be taken pursuant to this Section
11(c), a majority of the Board of Directors may suspend the exercisability of
the Rights for a period of up to sixty (60) days following the date on which
the Section 11(b) Event shall have occurred, in order to decide the appropriate
form of distribution to be made pursuant to this Section 11(c) and to determine
the value thereof. In the

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<PAGE> 18
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.
The Board of Directors may, but shall not be required to, establish procedures
to allocate the right to receive Common Stock and Common Stock Equivalents upon
exercise of the Rights among holders of Rights, which such allocation may be,
but is not required to be, pro-rata. For purposes hereof the Cash Equivalent
Amount shall be an amount equal to the fair market value of the Common Stock
which would be deliverable pursuant to Section 11(b) (if such shares were
available), determined by multiplying the current market price (determined as
set forth in Section 11(f) hereof) of the Common Stock as of the Business Day
next immediately preceding Distribution Date by the number of shares so
deliverable, less the amount of the exercise price therefor which would be paid
in accordance with Section 11(b) hereof.

(d) If the Company shall fix a record date for the
issuance of rights or warrants to all holders of Preferred Stock entitling them
(for a period expiring within 90 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or securities having the same or
more favorable rights, privileges and preferences as the Preferred Stock
("Equivalent Preferred Stock")) or securities convertible into Preferred Stock
or Equivalent Preferred Stock, at a price per share of Preferred Stock or per
share of Equivalent Preferred Stock or having a conversion or exercise price
per share, as the case may be, less than the current market price per share of
Preferred Stock (as defined in Section 11(f) hereof) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock or Equivalent Preferred Stock to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible).
In case such subscription price may be paid in a consideration, part or all of
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by a majority of the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.

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<PAGE> 19

(e) If the Company shall fix a record date for the making
of a distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular periodic cash dividend out of earnings
or retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or convertible securities, subscription rights or warrants
(excluding those referred to in Section 11(d) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the current market price for one share of
Preferred Stock (as defined in Section 11(f) hereof) on such record date less
the fair market value (as determined in good faith by a majority of the Board
of Directors, whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the assets or evidences of indebtedness so
to be distributed or of such convertible securities, subscription rights or
warrants applicable to one share of Preferred Stock, and the denominator of
which shall be such current market price for one share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.

(f) (i) For the purpose of any computation hereunder, the
"current market price" of any security (a "Security" for purposes of this
Section 11(f)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as hereinafter defined) immediately prior to such date; provided, however,
that in the event that the current market price per share of such Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares
of such Security or securities convertible into shares of such Security or (B)
any subdivision, combination or reclassification of such Security, and prior to
the expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be appropriately adjusted to reflect the current market price per share
equivalent of such Security. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system

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<PAGE> 20
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") National Market System, or if the Security is not
listed or admitted to trading on any national securities exchange or included
in the NASDAQ National Market System, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such
other system then in use, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by a majority of the Board of Directors. If on any such date no
market maker is making a market in the Security, the fair value of such
Security on such date as determined in good faith by a majority of the Board of
Directors shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or, if the Security
is not listed or admitted to trading on any national securities exchange a day
on which the NASDAQ National Market System is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange or included in the NASDAQ National Market System,
a Business Day. If the Security is not publicly held or not so listed or
traded, "current market price" shall mean the fair value as determined in good
faith by a majority of the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent.

(ii) For the purpose of any computation hereunder,
the "current market price" per share (or one one-hundredth of a share) of
Preferred Stock shall be determined in the same manner as set forth above for
the Common Stock in clause (i) of this Section 11(f) (other than the last
sentence thereof). If the current market price per share (or one one-hundredth
of a share) of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(f), the "current market
price" per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied by the
current market price per share of the Common Stock and the "current market
price" per one one-hundredth of a share of Preferred Stock shall be equal to
the current market price per share of the Common Stock (as appropriately
adjusted). If neither the Common Stock nor the Preferred Stock is publicly
held or so listed or traded, "current market price" per share shall mean the
fair value per share as determined in good faith by the Board of Directors,
whose

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<PAGE> 21

determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

(g) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any adjustments which
by reason of this Section 11(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share, as the case may be. Notwithstanding the first
sentence of this Section 11(g), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three years from the date of the
transaction which mandates such adjustment or (ii) the Expiration Date.

(h) In the event that at any time, as a result of an
adjustment made pursuant to Section 11(a) or (b) hereof, the holder of any
Right shall be entitled to receive upon exercise of such Right any shares of
capital stock of the Company other than shares of Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares
contained in Section 11(a) through (e) hereof, inclusive, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the shares of Preferred
Stock shall apply on like terms to any such other shares.

(i) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-hundredths of a share of Preferred Stock or other capital stock of the
Company purchasable from time to time hereunder upon exercise of the Rights,
all subject to further adjustment of the Purchase Price.

(j) Unless the Company shall have exercised its election
as provided in Section 11(k) hereof, upon each adjustment of the Purchase Price
as a result of the calculations made in Section 11(d) and (e) hereof, each
Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-hundredths of a share of Preferred Stock (calculated to the
nearest ten-thousandth) obtained by (i) multiplying (A) the number of one
one-hundredths of a share of Preferred Stock covered by a Right immediately
prior to the adjustment by (B) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.

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<PAGE> 22

(k) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of shares of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for which such Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(k), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record
of Right Certificates on the record date specified in the public announcement.

(l) Irrespective of any adjustment or change in the
Purchase Price or the number of shares of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of shares
which were expressed in the initial Right Certificates issued hereunder.

(m) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value, if any, of the
shares of Common Stock or other securities and below one one-hundredth of the
then par value, if any, of the Preferred Stock, issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of such Preferred Stock, Common

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<PAGE> 23

Stock or other securities at such adjusted Purchase Price. If upon any
exercise of the Rights, a holder is to receive a combination of Common Stock
and Common Stock Equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value of a share of Common Stock of
the Company, shall be allocated as the payment for each share of Common Stock
of the Company so received.

(n) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.

(o) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment a majority
of the Board of Directors shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any Preferred Stock at less than the then current market price, (iii)
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exchangeable for Preferred Stock, (iv) stock dividends
or (v) issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to the holders of its Preferred
Stock, shall not be taxable to such stockholders.

(p) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the
number of one one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after such event

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<PAGE> 24

shall have issued with respect to it that number of Rights which each Common
Share outstanding immediately prior to such event had issued with respect to
it. The adjustments provided for in this Section 11(p) shall be made
successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.

(q) The Company covenants and agrees that it shall not,
at any time after the Distribution Date and so long as the Rights have not been
redeemed pursuant to Section 23 hereof or exchanged pursuant to Section 24
hereof, (i) consolidate with, (ii) merge with or into, or (iii) sell or
transfer, in one or more transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to, any other Person, if at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.

(r) The Company covenants and agrees that, after the
Stock Acquisition Date, it will not, except as permitted by Sections 23 and 24
hereof, take any action the purpose or effect of which is to diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.

Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Sections 11 or 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 26 hereof, or prior to the Distribution Date, disclose a brief summary
in a filing under the Securities Exchange Act of 1934, as amended. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustments therein contained.

Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.

(a) In the event that, directly or indirectly, following
the Distribution Date, (A) the Company shall consolidate with, or merge with
and into, any other Person, (B) any Person shall consolidate with or merge with
and into the Company, and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (C) the
Company shall sell, or otherwise transfer (or one or more

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<PAGE> 25

of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than to the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right, subject to Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price multiplied by the then applicable number of one-one
hundredths of a share of Preferred Stock for which a Right is then exercisable
(or if a Section 11(b) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-hundredths of a share
for which a Right was exercisable immediately prior to the first occurrence of
a Section 11(b) Event by the Purchase Price in effect immediately prior to such
first occurrence) in accordance with the terms of this Agreement, in lieu of
Preferred Stock, such number of shares of freely tradeable Common Stock of the
Principal Party (as hereinafter defined), free and clear of liens, rights of
call or first refusal, encumbrances or other adverse claims, as shall be equal
to the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a share of Preferred Stock for which a
Right is then exercisable (or if a Section 11(b) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such one
one-hundredths of a share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(b) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
by (B) 25% of the current market price per share of the Common Stock of such
Principal Party (determined in the manner described in Section 11(f) hereof) on
the date of consummation of such consolidation, merger, sale or transfer; (ii)
the Principal Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof, except for the provisions of
11(b), shall apply to such Principal Party; and (iv) such Principal Party shall
take such steps (including, but not limited to, the authorization and
reservation of a sufficient number of shares of its Common Stock to permit
exercise of all outstanding Rights in accordance with this Section 13(a)) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights.

(b) "Principal Party" shall mean:

(i) in the case of any transaction described in
clause (A) or (B) of the first sentence of Section 13(a) hereof, the Person
that is the issuer of any securities into which shares

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<PAGE> 26

of Common Stock of the Company are converted in such merger or consolidation,
and if no securities are so issued, the Person, including the Company, that is
the other party to the merger or consolidation; and

(ii) in the case of any transaction described in
clause (C) of the first sentence of Section 13(a) hereof, the Person that is
the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; provided, however,
that in any case described in clause (i) or (ii) in this Section 13(b), (A) if
the Common Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered under Section 12 of
the Exchange Act, and such Person is a direct or indirect Subsidiary or
Affiliate of another Person, the Common Stock of which has been so registered,
"Principal Party" shall refer to such other Person; (B) in case such Person is
a Subsidiary, directly or indirectly, or Affiliate of more than one Person, the
Common Stock of all of which are and have been so registered, "Principal Party"
shall refer to whichever of such Persons is the issuer of the Common Stock
having the greatest market value, and (C) in case such Person is, or is owned
directly or indirectly by, a partnership or joint venture formed by two or more
Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in (A) and (B) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the Principal Parties
in each such chain shall bear the obligations set forth in this Section 13 in
the same ratio as their direct or indirect interests in such Person bear to the
total of such interests.

(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
each Principal Party and each other Person who may become a Principal Party as
a result of such consolidation, merger, sale or transfer shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any consolidation,
merger, sale or transfer of assets mentioned in paragraph (a) of this Section
13, the Principal Party will:

(i) prepare and file a registration statement
under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, will use its
best efforts to cause such registration statement to become effective as soon
as practicable after such filing and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date;

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<PAGE> 27

(ii) use its best efforts to qualify or register
the Rights and the securities purchasable upon exercise of the Rights under the
blue sky laws of such jurisdictions as may be necessary or appropriate; and

(iii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for registration
on Form 10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(b) Event, the Rights which have not theretofore been exercised shall
thereafter also become exercisable in the manner described in Section 13(a)
hereof.

Section 14. Fractional Rights and Fractional Shares.

(a) The Company shall not be required to issue fractions
of Rights or to distribute Right Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right shall be the closing price of
the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, as reported by the NASDAQ National
Market System or, if the Rights are not listed or admitted to trading on any
national securities exchange or included in the NASDAQ National Market System,
the last quoted price, or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by NASDAQ or such
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights selected
by a majority of the Board of Directors. If on any such date no such market
maker is making a market in the Rights, the fair value of the Rights on such
date as determined in good faith by a majority of the Board of Directors shall
be used. Notwithstanding the foregoing, however, the Company shall not be
obligated to make any such payments in respect of fractional rights unless and
until a Distribution Date shall have occurred.

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<PAGE> 28

(b) The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions which are integral multiples
of one one-hundredth of a share of Preferred Stock) upon exercise of the Rights
or to distribute certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of one one-hundredth
of a share of Preferred Stock). Fractions of shares of Preferred Stock in
integral multiples of one one-hundredth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of the shares of Preferred Stock represented
by such depositary receipts. In lieu of fractional shares of Preferred Stock
that are not integral multiples of one one-hundredth of a share of Preferred
Stock, the Company may pay to the registered holders of Right Certificates at
the time such Right Certificates are exercised as herein provided an amount in
cash equal to the same fraction of the current market value of one
one-hundredths of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-hundredth of a share of Preferred
Stock shall be one one-hundredth of the closing price of a share of Preferred
Stock (as determined pursuant to Section 11(f)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.

(c) Following the occurrence of one of the transactions
or events specified in Section 11 hereof giving rise to the right to receive
Common Stock Equivalents (other than Preferred Stock) or other securities upon
the exercise of a Right, the Company shall not be required to issue fractions
of shares or units of such Common Stock Equivalents or other securities upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of such Common Stock Equivalents or other securities. In lieu of
fractional shares or units of such Common Stock Equivalents or other
securities, the Company may pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of a share or unit of
such Common Stock Equivalent or other securities. For purposes of this Section
14(c), the current market value shall be determined in the manner set forth in
Section 11(f) hereof for the Trading Day immediately prior to the date of such
exercise and, if such Common Stock Equivalent is not traded, each such Common
Stock Equivalent shall have the value of one one-hundredth of a share of
Preferred Stock.

(d) Except as otherwise expressly provided in this
Section 14, the holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional share upon
exercise of Rights.

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<PAGE> 29

Section 15. Rights of Action. All rights of action in
respect of this Agreement, except for rights of action given to the Rights
Agent under Section 18 or Section 20 hereof, are vested in the respective
registered holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of Common Stock); and any registered holder of any
Right Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Stock), may, in
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations
of any Person subject to this Agreement. Holders of Rights shall be entitled
to recover the reasonable costs and expenses, including attorneys' fees,
incurred by them in any action to enforce the provisions of this Agreement.

Section 16. Agreement of Right Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;

(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent, duly endorsed or accompanied by a proper
instrument of transfer;

(c) the Company and the Rights Agent may deem and treat
the person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Stock Certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the associated
Common Stock Certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary; and

(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent

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<PAGE> 30

jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.

Section 17. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of Preferred
Stock, Common Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.

Section 18. Concerning the Rights Agent. The Company agrees
to pay to the Rights Agent such compensation as shall be agreed to in writing
between the Company and the Rights Agent for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or expense, incurred
without gross negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including, without
limitation, the costs and expenses of defending against any claim of liability.
The provisions of this Section 18 shall survive the expiration of the Rights
and the termination of this Agreement.

The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate for Preferred Stock, Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed and executed by the proper Person or Persons.

Section 19. Merger or Consolidation or Change of Name of
Rights Agent. Any corporation into which the Rights Agent or any

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<PAGE> 31

successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business or stock transfer business of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.

In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations expressly imposed by this Agreement, and
no implied duties or obligations shall be read into this Agreement against the
Rights Agent, upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound:

(a) The Rights Agent may consult with legal counsel of
its selection (who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.

(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved

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<PAGE> 32

and established by a certificate signed by the Chairman of the Board, the
President or any Vice President and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.

(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.

(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any adjustment required
under the provisions of Sections 11 or 13 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice to the
Rights Agent of any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or other securities to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.

(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered

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<PAGE> 33

to be taken by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by the Rights Agent under this Agreement and the date on
and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in such
application on or after the date specified in such application (which date
shall not be less than three Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.

(h) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.

(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection thereof.

(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.

(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1, clause 2 and/or, in the case of the certificate attached to the form
of election to purchase, clause 3 thereof, the Rights Agent shall not take any

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<PAGE> 34

further action with respect to such requested exercise of transfer without
first consulting with the Company.

(l) In addition to the foregoing, the Rights Agent shall
be protected and shall incur no liability for, or in respect of, any action
taken or omitted by it in connection with its administration of this Agreement
if such acts or omissions are in reliance upon (i) the proper execution of the
certification concerning beneficial ownership appended to the form of
assignment and the form of election to purchase attached hereto unless the
Rights Agent shall have actual knowledge that, as executed, such certification
is untrue, or (ii) the non-execution of such certification including, without
limitation, any refusal to honor any otherwise permissible assignment or
election by reason of such non-execution.

(m) The Company agrees to give the Rights Agent prompt
written notice of any event or ownership which would prohibit the exercise or
transfer of the Right Certificates.

Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company. The Company
may remove the Rights Agent or any successor Rights Agent upon 30 days' notice
in writing, mailed to the Rights Agent or successor Rights Agent, as the case
may be. If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within a period of
30 days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the Rights Agent or the
registered holder of any Right may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of any
state, in good standing, having an office in the States of New York or
Delaware, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $25,000,000, or (b) an affiliate of
a corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than

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the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and Preferred Stock, and mail a notice thereof in writing to
the registered holders of the Right Certificates or, prior to the Distribution
Date, through any filing made by the Company pursuant to the Securities
Exchange Act of 1934, as amended. Failure to give any notice provided for
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.

Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by a majority of the Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares of stock or other securities or property
purchasable under the Right Certificates made in accordance with the provisions
of this Agreement.

Section 23. Redemption and Termination.

(a) A majority of the Board of Directors of the Company
may, at its option, at any time prior to the earlier of (i) the close of
business on the tenth Business Day following the Stock Acquisition Date or (ii)
the Final Expiration Date, elect to redeem all but not less than all of the
then outstanding Rights at a redemption price of 1c. per Right, as
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(b) Event until such time
as the Company's right of redemption hereunder has expired. The redemption of
the Rights by the Board of Directors may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish.

(b) Immediately upon the action of a majority of the
Board of Directors electing to redeem the Rights, evidence of which shall be
promptly filed with the Rights Agent, or, when appropriate, immediately upon
the time or satisfaction of such conditions as the Board of Directors may have
established, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public disclosure of any such redemption; provided, however, that
the failure to give, or any defect in, any such disclosure shall not affect the
validity of such redemption. Within 10 days after the action of the Board of

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Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the holders of the then outstanding Rights by mailing
such notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.

(c) Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23, Section
24 hereof and other than in connection with the purchase of Common Shares prior
to the Distribution Date.

Section 24. Exchange.

(a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan or compensation arrangement of the
Company or any such Subsidiary, or any entity holding securities of the Company
to the extent organized, appointed or established by the Company or any such
Subsidiary for or pursuant to the terms of any such employee benefit plan or
compensation arrangement), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Voting Power of the
Company.

(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights pursuant to subsection (a)
of this Section 24 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of
a holder of such Rights shall be to receive that number of shares of Common
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give notice to the Rights Agent and
public notice of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. The Company promptly shall mail a notice of any such exchange to all
of the holders of such Rights at their last addresses as they appear upon

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the registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by
which the exchange of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.

(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute Preferred Stock (or Equivalent Preferred
Stock, as such term is defined in Section 11(d) hereof) for Common Stock
exchangeable for Rights, at the initial rate of one one-hundredth of a share of
Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock,
as appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to the terms thereof, so that the fraction of a share
of Preferred Stock delivered in lieu of each share of Common Stock shall have
the same voting rights as one share of Common Stock.

(d) In the event that there shall not be sufficient
shares of Common Stock or Preferred Stock (or Equivalent Preferred Stock)
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock or Preferred Stock (or Equivalent Preferred Stock) for issuance
upon exchange of the Rights.

(e) The Company shall not be required to issue fractions
of Common Stock or to distribute certificates which evidence fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the Right Certificates with
regard to which such fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock. For the purposes of this paragraph
(e), the current market value of a whole share of Common Stock shall be the
closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 11(f)(i) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.

Section 25. Notice of Proposed Actions. In case the Company
shall propose (a) to pay any dividend payable in stock of any class to the
holders of its Preferred Stock or to make any other distribution to the holders
of its Preferred Stock (other than a regular periodic cash dividend out of
earnings or retained earnings of the Company), or (b) to offer to the holders
of its Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any

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other class or any other securities, rights or options, or (c) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock), or
(d) to effect any consolidation or merger into or with, or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sales or other transfer), in one or more transactions, of 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person, or (e) to effect the liquidation, dissolution or winding
up of the Company, or (f) to declare or pay any dividend on the Common Stock
payable in Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in Common Stock), then, in each such case, the Company
shall give to the Rights Agent and each holder of a Right, in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and
the date of participation therein by the holders of the Common Stock and/or
Preferred Stock, if any such date is to be fixed. Such notice shall be so
given in the case of any action covered by clauses (a) or (b) above at least
ten days prior to the record date for determining holders of the Preferred
Stock for purposes of such action, and in the case of any such other action, at
least ten days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Preferred Stock, whichever
shall be the earlier. The failure to give notice required by this Section 25
or any defect therein shall not affect the legality or validity of the action
taken by the Company or the vote upon any such action.

In case a Section 11(b) Event shall occur, then the Company
shall as soon as practicable thereafter give to the Rights Agent and each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(b) hereof.

Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:

Shorewood Packaging Corporation
55 Engineers Lane
Farmingdale, New York 11735

Attention: Secretary

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<PAGE> 39

Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:

The Bank of New York
101 Barclay Street, 12 West
New York, New York 10286

Attention: Raymond Romanski, Vice President

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

Section 27. Supplements and Amendments. The Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
or amendments hereto which the Company may deem necessary or desirable, any
such supplement or amendment to be evidenced by a writing signed by the
Company and the Rights Agent; provided, however, that from and after such time
as any Person becomes an Acquiring Person, this Agreement shall not be amended
in any manner which would adversely affect the interests of the holders of
Rights; provided further that the Company shall have the right to make any
changes unilaterally necessary to facilitate the appointment of a successor
Rights Agent, which such changes shall be set forth in a writing by the Company
or by the Company and such successor Rights Agent. Without limiting the
foregoing, the Company may at any time prior to such time as any Person becomes
an Acquiring Person amend this Agreement to lower the thresholds set forth in
Sections 1(a) and 3(a) hereof from 25% to not less than the greater of (i) any
percentage greater than the largest percentage of the Voting Power of the
Company then known by the Company to be beneficially owned by any Person (other
than the Company, any Subsidiary of the Company, or any employee benefit plan
or compensation arrangement of the Company or any Subsidiary of the Company,
and any entity holding securities of the Company to the extent organized,
appointed or established by the Company or any such Subsidiary for or pursuant
to the terms of any such employee benefit plan or compensation arrangement),
other than a person holding Voting Power of the Company in excess of the
then-existing thresholds pursuant to the written permission of the Board of
Directors of the Company together with all Affiliates or Associates of such
Person and (ii) 10%. Upon the delivery of a certificate from an appropriate
officer of the Company which states

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that the proposed supplement or amendment is in compliance with the terms of
this Section, the Rights Agent shall execute such supplement or amendment.
Notwithstanding any other provision hereof, the Rights Agent's consent must be
obtained regarding any amendment or supplement pursuant to this Section 27
which alters the Rights Agent's rights or duties.

Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.

Section 29. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Stock) any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Rights Agent
and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Stock).

Section 30. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is the intent of the parties hereto to enforce the remainder of the terms,
provisions, covenants and restrictions to the maximum extent permitted by law.

Section 31. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, provided, however, that the
rights and obligations of the Rights Agent shall be governed by and construed
in accordance with the laws of the State of New York.

Section 32. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.

Section 33. Descriptive Headings. Descriptive headings of
the several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first above written.

Attest: SHOREWOOD PACKAGING CORPORATION

By: /s/Joan Matheis By: /s/Howard M. Liebman
-------------------------- ----------------------------
Name: Joan Matheis Name: Howard M. Liebman
Title: Secretary Title: Executive Vice President

Attest: THE BANK OF NEW YORK, as Rights Agent

By: /s/ Diana M. Ajjan By: /s/ Raymond Romanski
-------------------------- ----------------------------
Name: Diana M. Ajjan Name: Raymond Romanski
Title: Assistant Vice President Title: Vice President

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Exhibit A

SHOREWOOD PACKAGING CORPORATION

FORM OF CERTIFICATE OF DESIGNATIONS

SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

(Pursuant to Section 151.180 of the
Delaware General and Corporation Law)

Shorewood Packaging Corporation (the "Company"), a corporation
organized and existing under the General and Business Corporation Law of the
State of Delaware, in accordance with Section 351.180 thereof, hereby
certifies:

That the Board of Directors of the Company, at a meeting duly
convened and held on May 4, 1995, pursuant to authority expressly vested in the
Board of Directors by the Company's Certificate of Incorporation, adopted the
following resolution creating a series of Five Hundred Thousand (500,000)
shares of the Company's Preferred Stock, par value $10.00 per share, designated
as Series B Junior Participating Preferred Stock:

RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors (the "Board") by the Company's Certificate of
Incorporation, the Board hereby creates a series of the Preferred Stock, par
value $10.00 per share, of the Company (the "Preferred Stock") and hereby
states that the designation and number of shares thereof, and the relative,
participating, optional and other rights of the shares of such series and the
qualifications, limitations or restrictions thereof, are as follows:

Section 1. Designation and Amount.

There shall be a series of the Preferred Stock which shall be
designated as the "Series B Junior Participating Preferred Stock," par value
$10.00 per share, and the number of shares constituting such series shall be
Five Hundred Thousand (500,000). Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series B Junior Participating Preferred
Stock to a number less than that of the shares then outstanding plus the number
of shares issuable upon exercise of outstanding rights, options or warrants or
upon conversion of outstanding securities issued by the Company.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of
any series of preferred stock of the Company ranking prior and

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superior to the Series B Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series B Junior Participating Preferred
Stock, in preference to the holders of shares of Common Stock, par value $.01
per share of the Company (the "Common Stock"), and of any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on any regular quarterly dividend payment date as shall be
established by the Board of Directors (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series B Junior Participating Preferred Stock, in an amount per share,
if any, (rounded to the nearest cent) equal to the greater of (a) $l.00 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series B Junior Participating Preferred Stock. In the event the
Company shall at any time after June 14, 1995 (the "Rights Declaration Date")
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series B Junior Participating Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

(B) The Company shall declare a dividend or distribution
on the Series B Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share
on the Series B Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.

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(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series B Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series B Junior Participating Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may, in
accordance with applicable law, fix a record date for the determination of
holders of shares of Series B Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than such number of days prior to the date fixed for the
payment thereof as may be allowed by applicable law.

Section 3. Voting Rights.

The holders of shares of Series B Junior Participating
Preferred Stock shall have the following voting rights:

(A) Each share of Series B Junior Participating Preferred
Stock shall entitle the holder thereof to 100 votes on all matters submitted to
a vote of the stockholders of the Company. In the event the Company shall at
any time after the Rights Declaration Date declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes to which holders of shares of Series B Junior
Participating Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

(B) Except as otherwise provided herein, in the Company's
Certificate of Incorporation or by law, the holders of shares of Series B
Junior Participating Preferred Stock, the holders of shares of Common Stock,
and the holders of shares of any

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<PAGE> 45

other capital stock of the Company having general voting rights, shall vote
together as one class on all matters submitted to a vote of stockholders of the
Company.

(C) Except as otherwise set forth herein or in the
Company's Articles of Restatement, and except as otherwise provided by law,
holders of Series B Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.

Section 4. Certain Restrictions.

(A) Whenever dividends or distributions payable on the
Series B Junior Participating Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series B Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Company shall not:

(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Junior Participating Preferred Stock;

(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series B Junior Participating Preferred Stock, except dividends paid
ratably on the Series B Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;

(iii) except as permitted in Section 4(A)(iv)
below, redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B Junior
Participating Preferred Stock, provided that the Company may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series B Junior Participating Preferred Stock; and

(iv) purchase or otherwise acquire for
consideration any shares of Series B Junior Participating Preferred
Stock, or any shares of stock ranking on a parity with the Series B
Junior Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as

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<PAGE> 46

determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.

(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares.

Any shares of Series B Junior Participating Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall
be retired and cancelled promptly after the acquisition thereof. The Company
shall cause all such shares upon their cancellation to be authorized but
unissued shares of Preferred Stock which may be reissued as part of a new
series of Preferred Stock, subject to the conditions and restrictions on
issuance set forth herein.

Section 6. Liquidation, Dissolution or Winding Up.

(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Company, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series B Junior
Participating Preferred Stock shall have received $100.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment (the "Series B Liquidation
Preference"). Following the payment of the full amount of the Series B
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series B Junior Participating Preferred Stock, unless,
prior thereto, the holders of shares of Common Stock shall have received an
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series B Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph C below to reflect such events as stock
dividends, and subdivisions, combinations and consolidations with respect to
the Common Stock) (such number in clause (ii) being referred to as the
"Adjustment Number"). Following the payment of the full amount of the Series B
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series B Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series B Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the

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remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Series B Junior Participating Preferred Stock and Common
Stock, on a per share basis, respectively.

(B) In the event there are not sufficient assets
available to permit payment in full of the Series B Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series B Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event there are not sufficient assets available to permit payment in full
of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.

(C) In the event the Company shall at any time after the
Rights Declaration Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc.

In case the Company shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock
are exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series B Junior
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time after the Rights Declaration Date
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series B Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common

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<PAGE> 48

Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior to
such event.

Section 8. Redemption.

The shares of Series B Junior Participating Preferred Stock
shall not be redeemable.

Section 9. Ranking.

The Series B Junior Participating Preferred Stock shall rank
junior to all other series of the Company's Preferred Stock as to the payment
of dividends and the distribution of assets, unless the terms of any such
series shall provide otherwise.

Section 10. Fractional Shares.

Series B Junior Participating Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Junior Participating Preferred Stock.

IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Company by its Vice President and attested by its
Secretary this day of June, 1995.

WITNESS: Shorewood Packaging Corporation

- -------------------------- ------------------------------
Name: Name:
Title: Secretary Title:

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<PAGE> 49

STATE OF NEW YORK )
) SS.
CITY OF NEW YORK )

On this ______ day of ________, 1995, before me,
_______________________, a Notary Public in and for the State of New York,
personally appeared [ ] and [ ], the [ ] and
[ ] of Shorewood Packaging Corporation respectively, known to
me to be the persons who executed the foregoing Certificate of Designations and
acknowledged to me that they executed the same pursuant to authority given by
the Board of Directors of such corporation as their free and voluntary act, and
as the free and voluntary act and deed of such corporation, for the uses and
purposes therein set forth.

___________________________

My commission expires:

______________________

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<PAGE> 50

Exhibit B

[Form of Right Certificate]

Certificate No. R-______________ _______ Rights

NOT EXERCISABLE AFTER THE EXPIRATION DATE.
AT THE OPTION OF THE COMPANY, THE RIGHTS ARE SUBJECT
TO REDEMPTION AT 1c. PER RIGHT OR EXCHANGE FOR
COMMON STOCK, UNDER THE CIRCUMSTANCES AND
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY ARE VOID IN THE CIRCUMSTANCES SPECIFIED
IN SECTION 7(e) OF THE RIGHTS AGREEMENT.

Right Certificate

SHOREWOOD PACKAGING CORPORATION

This certifies that _________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of June __, 1995 (the "Rights Agreement") between
Shorewood Packaging Corporation, a Delaware corporation (the "Company"), and
The Bank of New York, a New York banking corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 p.m. New York City time
on the Expiration Date, as that term is defined in the Rights Agreement, at the
office of the Rights Agent, or its successor as Rights Agent, one one-hundredth
of a fully paid, nonassessable share of the Series B Junior Participating
Preferred Stock, par value $10.00 per share ("Preferred Stock"), of the
Company, at a purchase price of $17.00 per one one-hundredth of a share (the
"Purchase Price") upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of shares which may be
purchased upon exercise of each Right) and the Purchase Price set forth above,
are the number and Purchase Price as of June 14, 1995 based on the shares of
Preferred Stock of the Company as constituted at such date.

The Purchase Price and the number of shares of Preferred Stock
which may be purchased upon the exercise of each of the Rights evidenced by
this Right Certificate are subject to

-1-

<PAGE> 51

modification and adjustment upon the happening of certain events as provided in
the Rights Agreement.

This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates. Copies of the Rights Agreement are on file at the Company and
the above-mentioned office of the Rights Agent and are also available upon
written request to the Company.

This Right Certificate, with or without other Right
Certificates, upon surrender at the office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of shares of Preferred Stock as the Rights evidenced by the Right Certificate
or Right Certificates surrendered shall have entitled such holder to purchase.
If this Right Certificate shall be exercised in part, the holder shall be
entitled to receive, upon surrender hereof, another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of 1c. per Right on or prior to the Stock Acquisition Date (as
defined in the Rights Agreement). In addition, subject to the provisions of
the Rights Agreement, the Rights evidenced by this Certificate may be exchanged
by the Company at its option for one share of Common Stock following the Stock
Acquisition Date and prior to the time an Acquiring Person, as that term is
defined in the Rights Agreement, owns 50% or more of the Voting Power, as that
term is defined in the Rights Agreement, of the Company.

No fractional shares of Preferred Stock will be issued upon
the exercise of any Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts). In
lieu of fractions of a share, a cash payment will be made, as provided in the
Rights Agreement.

No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to

-2-

<PAGE> 52

vote for the election of directors or upon any matter submitted to shareholders
at any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting shareholders
(except as provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by an authorized signatory
of the Rights Agent.

WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _______ , 199_.

SHOREWOOD PACKAGING CORPORATION

By By
----------------------- ---------------------------------
Name: Name:
Title: Title:

Countersigned:

THE BANK OF NEW YORK,
as Rights Agent

By
-----------------------
Authorized signatory

Date of countersignature:

-3-

<PAGE> 53

[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED ___________________________________________
hereby sells, assigns and transfers unto

_______________________________________________________________________________
(Please print name and address of transferee)

_______________________________________________________________________________

this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.

Dated: ____________, 19__

__________________________________
Signature

(Signature must conform in all
respects to name of holder as
specified on the face of this Right
Certificate)
Signature Guaranteed:

Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Rights Agent, which requirements
include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Rights Agent in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.

-4-

<PAGE> 54

CERTIFICATE

The undersigned hereby certifies by checking the appropriate
boxes that:

(1) this Right Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);

(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.

Dated: ___________, 19__ ___________________________________
Signature

(Signature must conform in all respects to
name of holder as specified on the face of
this Right Certificate)

-5-

<PAGE> 55

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to
exercise the Right Certificate.)

To Shorewood Packaging Corporation:

The undersigned hereby irrevocably elects to exercise
____________________________ Rights represented by this Right Certificate to
purchase the shares of Preferred Stock issuable upon the exercise of such
Rights and requests that certificates for such shares be issued in the name of:

Name: _________________________
Address: ______________________
______________________

Social security
or taxpayer identification
number: _______________________

If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Name: _________________________
Address: ______________________
______________________

Social security
or taxpayer identification
number: _______________________

Dated: ___________, 19__

___________________________________
Signature

(Signature must conform in all
respects to name of holder as
specified on the face of this Right
Certificate)

Signature Guaranteed:

Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Rights Agent, which requirements
include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Rights Agent in addition to, or in
substitution for, STAMP, ass in accordance with the Securities Exchange Act of
1934, as amended.

-6-

<PAGE> 56

CERTIFICATE

The undersigned hereby certifies by checking the appropriate
boxes that:

(1) the Rights evidenced by this Right Certificate [ ]
are [ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);

(2) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);

(3) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.

Dated: __________, 19__ ___________________________________
Signature

(Signature must conform in all respects to
name of holder as specified on the face of
this Right Certificate)

NOTICE

The signature in the foregoing Forms of Assignment and
Election must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.

In the event the certification set forth above in the form of
Assignment or the form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.

-7-

<PAGE> 1
Exhibit 9

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

SHOREWOOD PACKAGING CORPORATION
WITH
HOWARD M. LIEBMAN

AGREEMENT made effective as of May 3, 1998, among SHOREWOOD PACKAGING
CORPORATION, a Delaware corporation having its principal executive offices at
277 Park Avenue, New York, N.Y. 10172-0124 (herein called the "Corporation"),
and HOWARD M. LIEBMAN, currently residing at 1302 Azure Place, Hewlett Harbor,
N.Y. 11557 (herein called the "Executive").

W I T N E S S E T H:
----------

The Corporation and the Executive entered into that certain Employment
Agreement dated as of May 16, 1994 (the "Prior Employment Agreement"), which
provides for the employment of the Executive by the Corporation upon the terms
and conditions set forth therein.

The Corporation and the Employee desire to enter into a new employment
agreement upon the terms and conditions hereinafter set forth, which employment
agreement will supersede and replace the Prior Employment Agreement in its
entirety.

The Corporation recognized that the longer the Executive remains in the
full time active employ of the Corporation, the more valuable will be any
consultative and advisory services that the Executive may provide during his
full time employment by the Corporation.

The Corporation recognized that the possibility of a proposal from a third
person, whether solicited by the Corporation or unsolicited, concerning a
possible business combination with the Corporation, including the acquisition of
a substantial share of the equity or voting securities of the Corporation, may
be unsettling to the Executive and deter him from continuing full time
employment with the Corporation.

This Agreement is intended to help assure a continuing dedication by the
Executive to his duties to the Corporation notwithstanding the possibility or
occurrence of a business combination proposal.

The Corporation and the Executive believe it imperative that should the
Corporation receive proposals from third parties with respect to its future, the
Executive should, without being influenced by the uncertainties of his own
situation, assess and advise the Corporation whether such proposals would be in
the best interest of the Corporation and its stockholders and take such other
action regarding such proposals as the Corporation might
<PAGE> 2
determine to be appropriate.

Accordingly, the parties desire to and do hereby enter into this Agreement
as of the date first set forth above.

NOW, THEREFORE,

1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of this Agreement
shall be from May 3, 1998 through and including May 2, 2003. The Corporation
agrees to and does hereby employ the Executive as Chief Financial Officer and an
Executive Vice President for the period commencing May 3, 1998 and terminating
May 2, 2003 (the "Employment Period") and the Executive agrees that he shall
serve an Executive Vice President and the Chief Financial Officer of the
Corporation during the Employment Period. The foregoing notwithstanding, in the
event of any "Change in Control" (as hereinafter defined) of the Corporation at
any time during the last two fiscal years of the Corporation beginning prior to
May 2, 2003, the Employment Period hereunder shall be automatically extended
through and including May 2, 2005.

2. DUTIES. Except as hereinafter provided, the Executive shall during the
Employment Period perform the executive and administrative duties and functions
and shall have the powers and privileges of an Executive Vice President and the
Chief Financial Officer of the Corporation, as such duties, functions, powers
and privileges are defined in the By-Laws of the Corporation in effect on the
date hereof and as currently interpreted, and, to the extent not defined
therein, as the same are customarily performed and exercised by a Chief
Financial Officer or an Executive Vice President of a publicly owned corporation
incorporated in one of the states of the United States of America. The Executive
shall serve as a member of the Board of Directors (and of the Executive
Committee or any similar committee having powers of the Board of Directors now
in existence or hereafter created) of the Corporation without any additional
compensation for such services for so long as the Executive is elected to serve
on the Board, the Executive Committee or any similar committee. As used in this
Agreement, the term "Corporation" includes each Subsidiary of the Corporation.
So long as he is an officer of the Corporation, the Executive agrees to devote
substantially all his business time to the business and affairs of the
Corporation, and to exert his best efforts in the performance of his duties as
an officer, director and member of any committee of the Board of Directors of
the Corporation to which he may be elected, so as to promote the profit, benefit
and advantage of the business to the Corporation. The Executive agrees to accept
the payments to be made to him under his Agreement as full and complete
compensation for the services required to be performed by him under this
Agreement.

3. COMPENSATION. As compensation for the services to be rendered by the
Executive pursuant to this Agreement, subject to the conditions herein stated,
the Corporation agrees to pay to the Executive all of the following:

<PAGE> 3
equal as may be practicable or otherwise in accordance with the Corporation's
customary payroll practices for its Executives. Executive's Base Salary shall
be reviewed annually and may be increased at the Corporation's discretion. This
Agreement shall not be deemed abrogated or terminated if the Corporation, in
its discretion, shall determine to increase the compensation of the Executive
for any period of time or if the Executive shall accept such increase; but,
nothing herein shall be deemed to obligate the Corporation to make any such
increase.

(b) PARACHUTE EFFECTIVE DATE. Notwithstanding the present effectiveness of
this Agreement, the provisions of Sections 3(f), (g) and (l) of this Agreement
shall become operative only when, as and if there has been a "Change in Control"
of the Corporation. For purposes of this Agreement, the terms "Subsidiary" and
"Subsidiaries" shall mean each corporation of which more than 50% of the
outstanding capital stock entitled to vote for directors is owned directly or
indirectly by the Corporation and a "Change in Control" of the Corporation shall
be deemed to have occurred upon the occurrence of any of the following events:

(i) A change in control of the direction and administration of the
Corporation's business of a nature that if any securities of the Corporation
were registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), would be required to be reported in response to (a) Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Exchange Act, or (b)
Item 1(a) of Form 8-K under the Exchange Act as each is in effect on the date
hereof and any successor provisions of such regulations under the Exchange Act,
whether or not the Corporation is then subject to such reporting requirements;
or

(ii) Any "person" or "group" (as such term is used in connection with
Section 13(d) and 14(d)(2) of the Exchange Act) but excluding any employee
benefit plan of the Corporation or any "affiliate" or "associate" of the
Corporation (as defined in Regulation 12b-2 under the Exchange Act)(a) is or
becomes the "beneficial owner" (as defined in rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
fifty percent (50%) or more of the combined voting power of the Corporation's
outstanding securities then entitled ordinarily (and apart from rights accruing
under special circumstances) to vote for the election of directors or (b)
acquires by proxy or otherwise 50% or more of the combined voting securities of
the Corporation having the right to vote for the election of directors of the
Corporation, for any merger or consolidation of the Corporation, or for any
other matter; or

(iii) During any period of twenty-four (24) consecutive months, the
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation or any individuals who would be "Continuing
Directors" (as hereinafter defined) cease for any reason to constitute at least
a majority thereof; or

(iv) The Corporation shall cease to meet the basic conditions of
listing on the New York Stock Exchange (or any other securities exchange on
which the Corporation's Common Stock, as hereinafter defined, is listed for
trading) in respect of the number of shares of the Corporation's Common Stock
held by the public; or

(v) There shall be consummated (A) any consolidation, merger or
recapitalization of the Corporation or any similar transaction involving the
Corporation, whether

3
<PAGE> 4
or not the Corporation is the continuing or surviving corporation, pursuant to
which shares of the Corporation's common stock, par value $.01 per share
("Common Stock"), would be converted into cash, securities or other property,
other than a merger of the Corporation in which the holders of Common Stock
immediately prior to the merger have the same proportion and ownership of
common stock of the surviving corporation immediately after the merger, (B) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Corporation or (C) the adoption of a plan of complete liquidation of the
Corporation (whether or not in connection with the sale of all or substantially
all of the Corporation's assets) or a series of partial liquidations of the
Corporation that is de jure or de facto part of a plan of complete liquidation
of the Corporation; provided, that the divestiture of less than substantially
all of the assets of the Corporation in one transaction or a series of related
transactions, whether effected by sale, lease, exchange, spin-off, sale of the
stock or merger of a Subsidiary or otherwise, or a transaction solely for the
purpose of reincorporating the Corporation in another jurisdiction, shall not
constitute a "Change-in-Control"; or

(vi) The Board of Directors of the Corporation shall approve any
merger, consolidation, or like business combination or reorganization of the
Corporation, the consummation of which would result in the occurrence of any
event described in Section 3(c)(i), (ii) or (v) above.

(c) DEFINITION OF "CONTINUING DIRECTORS". For purposes of this Agreement,
"Continuing Directors" shall mean the directors of the Corporation in office on
the date hereof and any successor to any such director and any additional
director who after the date hereof (i) was nominated or selected by a majority
of the Continuing Directors in office at the time of his nomination or
selection and (ii) who is not an "affiliate" or "associate" (as defined in
Regulation 12b-2 under the Exchange Act) or any person who is the beneficial
owner, directly or indirectly, of securities representing ten percent (10%) or
more of the combined voting power of the Corporation's outstanding securities
then entitled ordinarily to vote for the election of directors.

(d) TERMINATION RIGHTS UNCHANGED. Except as provided in Section 3(f)
below, nothing in this Agreement shall affect any right which the Executive may
otherwise have to terminate his employment by the Corporation or a Subsidiary,
nor shall anything in this Agreement affect any right which the Corporation or
any Subsidiary may have to terminate the Executive's employment at any time in
any lawful manner, subject to the provision that in the event of termination of
the Executive's employment under the circumstances specified in Sections 3(g)
and 3(l) below following a Change in Control, the Corporation will provide to
the Executive the payments and benefits described in Sections 3(g) and 3(l) of
this Agreement.

(e) VOLUNTARY TERMINATION. In the event any person or organization
commences a tender or exchange offer, circulates a proxy statement to the
Corporation's stockholders, or takes other steps designed to effect a Change in
Control of the Corporation, the Executive agrees that in order to receive the
benefits provided by this Agreement, he will not voluntarily leave the employ of
the corporation or any of its Subsidiaries, and will continue to perform his
regular duties and to render the services specified in the recitals of this
Agreement, until such person or organization has abandoned or terminated his
efforts to effect a Change in

<PAGE> 5
Control or until a Change in Control has occurred. Should the Executive
voluntarily terminate his employment before any such effort to effect a Change
in Control of the Corporation has commenced, or after any such effort has been
abandoned or terminated without effecting a Change in Control and no such
effort is then in process, this Agreement shall lapse and be of no further force
or effect. Should the Executive voluntarily terminate his employment with the
Corporation or any of its Subsidiaries during such time as any person or
organization has commenced, but has not yet abandoned, any steps designed to
effect a Change in Control of the Corporation, but at a time when a Change in
Control has not been effected, the Executive shall not be entitled to receive
any of the benefits of Sections 3(g) or 3(l) hereof.

(f) TERMINATION FOLLOWING CHANGE OF CONTROL. If a Change of Control of the
Corporation shall have occurred, then Executive shall be entitled to the
benefits provided in Section 3(l) hereof upon the subsequent termination of his
employment by the Corporation or the Executive for any reason or for no reason
within the applicable period set forth in Section 3(l) hereof following such
Change in Control.

(g) TERMINATION BY REASON OF DEATH OR DISABILITY. If the Executive's
employment is terminated by reason of his death or Disability during the two
(2) years following a Change in Control, the Executive shall be entitled to
death or long-term disability benefits, as the case may be, from the Corporation
no less favorable than the most favorable benefits to which he would have been
entitled had the death or termination for Disability occurred at any time
during the period commencing one year prior to the initiation of actions that
resulted in a Change in Control. If prior to any such termination for
Disability during the two (2) years following a Change in Control, the
Executive fails to perform his duties as a result of incapacity due to physical
or mental illness, he shall continue to receive his Base Salary and Guaranteed
Bonus (as herein defined) less any benefits as may be received by him under the
Corporation's or Subsidiary's disability plan until his employment is
terminated for Disability, and shall be entitled to the most favorable other
benefits applicable under the Corporation's policies during the period
commencing one year prior to the initiation of actions that resulted in the
Change in Control.

(h) DEFINITIONS. For purposes of this Agreement:

(i) "Disability" shall mean that, as a result of the Executive's
incapacity due to physical or mental illness, the Executive has been absent
from the full-time performance of his duties (as described in Section 2 hereof)
with the Corporation for six (6) consecutive months and, within thirty (30)
days after Notice of Termination is given to the Executive, he has not returned
to the full-time performance of his duties (as described in Section 2 hereof).
Any question as to the existence of Disability shall be determined by a
qualified independent physician selected by the Executive (or, if he is unable
to make such selection, such selection shall be made by any adult member of the
Executive's family) and approved by the Corporation. The written determination
of such physician shall be final and conclusive for purposes of this Agreement.

(ii) "Retirement" shall mean that the Executive shall have retired after

<PAGE> 6
reaching the earliest normal or early retirement date provided in the
Corporation's retirement plans as then in effect (or if Executive retires after
a Change in Control of the Corporation, as in effect on the date of the Change
in Control).

(iii) "For Cause" shall mean:

(A) The willful and continued failure by the Executive to
substantially perform his duties with the Corporation (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure resulting from termination by
the Executive for Good Reason) which is not cured within thirty (30) days after
a written demand for substantial performance is delivered to the Executive by
the Board of Directors, which demand specifically identifies the manner in which
the Board of Directors believes that the Executive has not substantially
performed his duties; or

(B) The willful engagement in conduct by the Executive which is
demonstrably and materially injurious to the Corporation, monetarily or
otherwise, which is not discontinued within five (5) days after written demand
to cease and desist from such conduct is delivered to the Executive by the Board
of Directors, which demand specifically identifies the conduct which the Board
of Directors believes is injurious to the Corporation; or

(C) Conviction for a felony or other crime punishable by
imprisonment for more than one (1) year, or the entering of a plea of nolo
contendere thereto.

Notwithstanding any of the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board of Directors (other than
the Executive) at a meeting called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with his
counsel, to be heard before the Board of Directors), finding that in the good
faith opinion of the Board of Directors the Executive was guilty of conduct set
forth above in clause (A), (B) or (C) and specifying the particulars thereof in
detail.

For purposes of this Section 3(j), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him knowing and with the intent that such action or inaction would not
be in the best interests of the Corporation or otherwise was done or omitted to
be done in bad faith.

(iv) "Base Salary" shall mean the annual base salary paid to the
Executive immediately prior to the Change in Control of the Corporation
(provided that such amount shall in no event be less than the annual Base Salary
paid to the Executive during the one (1) year period immediately prior to the
Change in Control).

(i) NOTICE OF TERMINATION. Any purported termination of employment by
the Corporation by reason of the Executive's Disability or for Cause, or by the
Executive for any or no reason, shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice given by the

<PAGE> 7
Executive or by the Corporation or a Subsidiary, as the case may be, which shall
indicate the specific basis for termination (if any) and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
determination of any payments under this Agreement; provided, however, that the
Corporation shall not be entitled to give a Notice of Termination that it is
terminating Executive's employment hereunder with the Corporation or a
Subsidiary by reason of Executive's Disability or for Cause after the expiration
of six (6) months following the last to occur of the events specified by it to
constitute Cause or Disability.

(j) DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" shall mean (i) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
the Executive shall not have returned to the full-time performance of his duties
(as described in Section 2 hereof) during such thirty (30) day period) or (ii)
if the Executive's employment is terminated by the Corporation for Cause or by
the Executive for any or no reason, the date specified in the Notice of
Termination, which shall be not more than ninety (90) days after such Notice of
Termination is given. If within thirty (30) days after any Notice of Termination
is given, the party who receives such Notice of Termination notifies the other
party that a Dispute (as hereinafter defined) exists, the parties agree to
pursue promptly the resolution of such Dispute with reasonable diligence.
Pending the resolution of any such Dispute, the Corporation or a Subsidiary
shall make the payments and provide the benefits to the Executive provided for
in Section 3(l) or Section 5 hereof, as the case may be. In the event that it is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for appeal therefrom
having expired and no appeal having been perfected), that a challenged
termination by the Corporation or a Subsidiary by reason of the Executive's
Disability or for Cause was justified, then all sums paid by the Corporation or
a Subsidiary to the Executive from the Date of Termination specified in the
Notice of Termination until final resolution of the Dispute pursuant to this
Section 3(l) shall be repaid promptly by the Executive to the Corporation or a
Subsidiary, with interest at the base rate charged from time to time by the
Corporation's principal commercial bank. In the event that it is finally
determined that a challenged termination by the Corporation or a Subsidiary by
reason of the Executive's Disability or for Cause was not justified, then the
Executive shall be entitled to retain all sums paid to the Executive pending
resolution of the Dispute.

(K) DEFINITION OF "DISPUTE". For purposes of this Agreement,
"Dispute" shall mean (i) in the case of the Executive's termination as an
Executive with the Corporation or a Subsidiary for Disability or Cause, that the
Executive challenges the existence of Disability or Cause.

(L) PARACHUTE PAYMENTS UPON TERMINATION; CHANGE OF CONTROL. If within
two (2) years after a Change in Control of the Corporation, the Executive's
employment shall terminate for any or no reason, subject in each case to Section
3(j) hereof, the Corporation or a Subsidiary will pay to the Executive as
compensation for services rendered, beginning not later than the fifth business
day following completion of the "Parachute Procedure" (as hereinafter defined)
if the Corporation elects to follow such procedure and not later than the
fifteenth day

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after the Date of Termination otherwise:

(i) the Executive's Base Salary and Guaranteed Bonus through
the Date of Termination, any existing fringe benefits (including medical
benefits) and incentive compensation for the fiscal year in which the
termination occurs in accordance with any arrangements then existing with the
Executive and proportionate to the period of the fiscal year which has expired
prior to the termination; and

(ii) a lump sum severance payment equal to 2.99 times the
Executive's average annual compensation during the Base Period (as hereinafter
defined)(subject to any applicable payroll or other taxes and charges required
to be withheld computed at the rate for supplemental payments) provided that in
no event shall "Total Payments" (as hereinafter defined) exceed 2.99 times the
Executive's "Base Amount", as such term is defined in Section 28OG of the
Internal Revenue Code (the "Code"). The Executive's Base Amount shall be
determined in accordance with temporary or final regulations promulgated under
section 28OG of the Code then in effect, if any. In the absence of such
regulations, if the Executive was not employed by the Corporation (or any
corporation or partnership affiliated with the Corporation (an "Affiliate")
within the meaning of Section 1504 of the Code or a predecessor of the
Corporation) during the entire five calendar years (the "Base Period") preceding
the calendar year in which a Change in Control of the Corporation occurred, the
Executive's average annual compensation for the purposes of such determination
shall be the lesser of (1) the average of the Executive's annual compensation
for the complete calendar years during the Base Period during which the
Executive was so employed or (2) the average of the Executive's annual
compensation for both complete and partial calendar years during the Base Period
during which the Executive was so employed, determined by annualizing any
compensation (other than nonrecurring items) includible in the Executive's gross
income for any partial calendar year or (3) the annual average of the
Executive's total compensation for the Base Period during which the Executive
was so employed, determined by dividing such total compensation by the number of
whole and fractional years included in the Base Period. Compensation payable to
the Executive by the Corporation or any Affiliate or predecessor of the
Corporation shall include every type and form of compensation includible in the
Executive's gross income in respect of the Executive's employment by the
Corporation or any Affiliate or predecessor of the Corporation, including
compensation income recognized as a result of the Executive's exercise of stock
options or sale of the stock so acquired, except to the extent otherwise
provided in temporary or final regulations promulgated under Section 28OG of the
Code. For purposes of this Section 3(l), a "change in control of the
Corporation" shall have the meaning set forth in Section 28OG of the Code and
any temporary or final regulations promulgated thereunder, subject to the
limitation stated in Section 3(l)(iii) below; and

(iii)(A) Notwithstanding anything to the contrary contained
herein, in the event that any portion of the aggregate payments and benefits
(the "Total Payments") received or to be received by the Executive, whether paid
or payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Corporation, a subsidiary or any other person
or entity, would not be deductible in whole or in part by the Corporation, a
Subsidiary or by such other person or entity in the calculation of its Federal
income tax by reason

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<PAGE> 9
of section 28OG of the Code, the Total Payments payable shall be reduced by the
least amount necessary so that no portion of the Total Payments would fail to be
deductible by reason of being an "excess parachute payment."

(B) At the option of the Corporation, no payments shall be made
pursuant to this section until the procedure described in this Section 3(1)(iii)
is completed (the "Parachute Procedure"). If the Corporation elects to comply
with such procedure, the Corporation shall cause its independent auditors to
deliver to the Executive, within fifteen (15) days after the Date of
Termination, a statement which shall indicate whether payment to the Executive
of the Total Payments would cause any portion of the Total Payment not to be
deductible in whole or part in the calculation of Federal income tax by reason
of Section 28OG of the Code, or would cause, directly or indirectly, an "excess
parachute payment" to exist within the meaning of Section 28OG of the Code. Such
statement shall set forth the value, calculated in accordance with the
principles of Section 28OG of the Code and any temporary or final regulations
promulgated thereunder, of any non-cash benefits or any deferred or contingent
payment or benefit payable pursuant to the terms of this Agreement or any other
plan, arrangement or benefit, together with sufficient information to enable the
Corporation to determine the payments that may be made to the Executive without
resulting in a loss of deduction under Section 28OG of the Code or an "excess
parachute payment" to the Executive within the meaning of Section 28OG of the
Code. The Corporation warrants to the Executive the accuracy of all information
and calculations supplied to the Executive in such statement. If such statement
indicates that payment of the Total Payments would result in a loss of a
deduction by reason of Section 28OG of the Code or would cause an "excess
parachute payment" to exist within the meaning of Section 28OG of the Code, the
Executive shall, within thirty (30) days after receipt of the statement, deliver
to the Corporation a statement indicating which of the payments and benefits
specified in such auditor's statement the Executive elects to receive; provided,
however, that the payments and benefits selected by the Executive shall not
result in a loss of deduction under Section 28OG of the Code or an "excess
parachute payment" to the Executive within the meaning of Section 28OG of the
Code and, provided, further, however, that if the Corporation does not comply
with the Parachute Procedure, it shall deliver the payments required by this
Section 3(1) within fifteen (15) days after the Date of Termination. Delivery of
the statement by the Executive to the Corporation shall constitute completion of
the Parachute Procedure; and

(iv) The Corporation shall contest any improper assessment of an
excise or other tax imposed as a result of determination that an "excess
parachute payment" has been made to the Executive within the meaning of Section
28OG of the Code. If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that
an "excess parachute payment" does in fact exist, within the meaning of Section
28OG of the Code, then the Executive shall pay to the Corporation, upon demand,
an amount not to exceed the sum of (i) the excess of the aggregate Total
Payments over the aggregate Total Payments that would have been paid without any
portion of such payment being deemed an "excess parachute payment" within the
meaning of Section 28OG of the Code and (ii)

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<PAGE> 10
interest on the amount set forth in clause (i) above at the applicable federal
rate specified in Section 1274(d) of the Code from the date of receipt by the
Executive of such excess until the date of such repayment.

(v) If litigation shall be brought to enforce or interpret any provision
contained herein, the Corporation shall indemnify the Executive for his
attorneys' fees and disbursements incurred in such litigation and pay
prejudgment interest on any money judgment obtained by the Executive calculated
at the base rate of interest charged from time to time from the date that
payment should have been made under this Agreement; provided, however, that the
Executive shall not have been found by the court to have had no cause to bring
the action, or to have acted in bad faith, which findings must be final with the
time to appeal therefrom having expired and no appeal having been taken.

(vi) The Corporation's obligation to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstance, including, without limitation,
any setoff, counterclaim, recoupment, defense or other right which the
Corporation may have against the Executive or anyone else. All amounts payable
by the Corporation hereunder shall be paid without notice or demand.

(vii) Except as expressly provided herein, the Corporation waives all
rights it may now have or may hereafter have conferred upon it, by statute or
otherwise, to terminate, cancel or rescind this Agreement in whole or in part.
Except as otherwise provided herein, each and every payment made hereunder by
the Corporation shall be final and the Corporation will not seek to recover for
any reason all or any part of such payment from the Executive or any person
entitled thereto. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment, and if
Executive obtains such other employment, any compensation earned by Executive
pursuant thereto shall not be applied to mitigate any payment made to Executive
pursuant to this Agreement.

(viii) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by written
agreement to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. As used in this Agreement, the term
"Corporation" shall mean the Corporation as hereinbefore defined and any
successor to or assignee of its business and/or assets as aforesaid which
executes and delivers the agreement required by this Section 3(1)(viii), or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.

(ix) This Agreement shall constitute the entire agreement between the
Executive and the Corporation concerning the Executive's termination subsequent
to a Change in Control as provided herein, and performance of its obligations
hereunder by the Corporation shall constitute full settlement and release of any
claim or cause of action, of whatsoever nature,

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which the Executive might otherwise assert or claim against the Corporation or
any of its directors, stockholders, officers or employees on account of such
termination. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing, signed by the Executive and an authorized officer of the Corporation.
No waiver by either party hereto at any time of any breach by the other party
hereto of compliance with any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any similar or
dissimilar provision or condition at such same or at any prior or subsequent
time. No assurances or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. However, this Agreement is in
addition to and not in lieu or any other plan providing for payments to or
benefits for the Executive or any agreement now existing or which hereafter may
be entered into between the Corporation and the Executive, provided that,
notwithstanding anything to the contrary contained in the terms of any such
plan or agreement, in the event of Executive's termination, within two (2)
years after a Change in Control as provided herein, of Executive's employment,
this Agreement shall govern the rights and the obligations of the Corporation
and the Executive.

4. BENEFITS. The Executive shall be entitled to participate in any life,
accident and health insurance, hospitalization or any other plan or benefits
afforded by the Corporation to its executives generally, if and to the extent
that the Executive is eligible to participate in accordance with the provisions
of any such plan or for such benefits. Nothing herein is intended, or shall be
construed, to require the Corporation to institute any, or any particular, plan
or benefits. In addition, the Executive shall be furnished with an automobile
lease allowance of $[1,000] per month during the Employment Period plus
reimbursement for reasonable insurance, maintenance, gasoline and parking
expenses incurred in furtherance of the Corporation's business.

5. EARLY TERMINATION; NO CHANGE OF CONTROL. If prior to the expiration of
this Agreement or a Change in Control of the Corporation, (a) the Executive
fails because of Disability to perform services of the character contemplated
by Section 2 of this Agreement, or (b) if the Corporation's Board of Directors
determines that the Executive's employment should be terminated for Cause;
then, the Corporation may by written Notice of Termination terminate
Executive's employment. In addition, this Agreement shall terminate immediately
upon the death or Retirement of Executive prior to a change of Control of the
Corporation. Upon any termination of the Executive's employment under this
Section 5, the Executive shall be deemed removed from all positions held by him
with the Corporation, its subsidiaries and affiliates, effective as of the Date
of Termination. Upon any termination of the Executive's employment under this
Section 5, the Executive shall be entitled to receive solely all amounts and
benefits to be paid or provided by the Corporation under Sections 3(a), 3(b)
and 4 of this Agreement up to the Date of Termination, except that a
"Proportionate Part" (hereinafter defined) of the Guaranteed Bonus is payable
under Section 3(b) of this Agreement. The provisions of this Section 5 shall
terminate and cease to be of any force or effect immediately upon any Change in
Control of the Corporation.

6. (a) COMPLETE PAYMENT. Upon the payment of the amounts provided in this

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Agreement, the Corporation shall have no further liability of any kind or
nature whatsoever to the Executive under this Agreement, except such liability,
if any, as may continue under any plan or for the benefits (in accordance with
the express terms hereof) referred to in Section 4 hereof. Notwithstanding the
foregoing, Executive expressly reserves any rights he may have at law equity or
otherwise in the event that his employment by the Corporation is terminated in
contravention of this Agreement.

(b) NON-COMPETITION. The Executive expressly covenants and agrees that
during the term of this Agreement he will not, directly or indirectly, own,
manage, operate, join, control or participate in or be connected with as an
officer, employee, partner, stockholder, or otherwise, any business,
individual, partnership, firm or corporation (other than a parent of the
Corporation or a subsidiary or affiliate of such parent), which is at the time
engaged wholly or partly, in the business of manufacturing and marketing
packaging products or in any business which is directly in competition with the
then business of the Corporation or any subsidiary or affiliate of the
Corporation (as defined in the General Rules and Regulations promulgated under
the Securities and Exchange Act of 1934), or any firm, partnership or
corporation which shall succeed to all or a substantial part of the business of
the Corporation, or any such subsidiary or affiliate.

(c) INVESTMENTS. Nothing in this Agreement is intended, or shall be
construed, to prevent the Executive during the term of his employment hereunder
from investing in the stock or other securities listed on a national securities
exchange or actively traded on the over-the-counter market of any corporation
which is at the time engaged wholly or partly in any business which is,
directly or indirectly, at the time, in competition with the business of the
Corporation or any such subsidiary or affiliate, or any firm, partnership, or
corporation which shall succeed to all or a substantial part of the business of
the Corporation, or any such subsidiary of affiliate, provided that the
Executive and direct members of his family living in the same household as the
Executive shall not directly or indirectly, hold, beneficially or otherwise, in
the aggregate, more than three percent of any issue of such stock or other
securities of any one such corporation.

(d) CONFIDENTIAL INFORMATION. The Executive expressly covenants and
agrees that he will not at any time, during the term of his employment hereunder
or thereafter and without regard to when or for what reason, if any, such
employment shall terminate, directly or indirectly, use or permit the use of any
trade secrets, customers' lists or other information of, or relating to, the
Corporation, or any Subsidiary or affiliate, in connection with any activity of
business, except the business of the Corporation of any Subsidiary or affiliate
of the Corporation, and will not divulge such trade secrets, customers' lists,
and information to any person, firm, or corporation whatsoever, except as may be
necessary in the performance of his duties hereunder.

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his part to be performed hereunder, or in the event of the breach or threatened
breach by the Executive of the terms and provisions of paragraphs (b) or (d) of
this Section, then the Corporation shall be entitled, if it so elects, to
institute and prosecute any proceedings in any court of competent jurisdiction,
either in law of equity, for such relief as it deems appropriate including,
without limiting the generality of the foregoing, any proceedings, to obtain
damages for any breach of this Agreement, or to enforce the specific performance
thereof by the Executive or to enjoin the Executive from performing services for
any other person, firm or corporation.

7. SEVERABILITY. The invalidity or unenforceability of any provisions of this
Agreement in any circumstances shall not affect the validity or enforceability
of such provision in any other circumstance or the validity or enforceability of
any other provision of this Agreement, and except to the extent such provision
is invalid or unenforceable, this Agreement shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof in such jurisdiction, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

8. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered mail, to this then
residence in the case of the Executive or to its principal office in the case of
the Corporation, and shall be deemed given when deposited in the United States
mails, postage prepaid.

9. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties and supersedes all prior agreements between the parties with respect
to the subject matter hereof. It may be changed orally but only by an agreement
in writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.

10. WAIVER. The waiver by the Corporation of a breach of any provision of this
Agreement by the Executive shall not operate or be construed as a waiver of any
subsequent breach by the Executive. The waiver by the Executive of a breach of
any provisions of this Agreement by the Corporation shall not operate or be
construed as a waiver of any subsequent breach by the Corporation.

11. GOVERNING LAW. This Agreement shall be subject to, and governed by, the
laws of the State of New York.

12. SUCCESSORS. The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and shall be binding upon any successor
of the Corporation or to the business of the Corporation. Neither this
Agreement or any rights or obligations of the Executive hereunder shall be
transferable or assignable by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to the Executive hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee
or

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other designee or, if there be no such designee, to the Executive's estate.

IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement in
duplicate original on the 10th day of November 1999 effective as of May 3, 1998.

SHOREWOOD PACKAGING CORPORATION

By: /s/ Marc P. Shore
------------------------------
Name: Marc P. Shore
Title: CEO and Chairman

/s/ Howard M. Liebman
---------------------------------
HOWARD M. LIEBMAN

<PAGE> 1
Exhibit 10

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

SHOREWOOD PACKAGING CORPORATION
WITH
MARC P. SHORE

AGREEMENT made effective as of May 3, 1998, among SHOREWOOD PACKAGING
CORPORATION, a Delaware corporation having its principal executive offices at
277 Park Avenue, New York, New York 10172 (herein called the "Corporation") and
MARC P. SHORE, currently residing at 68 Talcott Road, Ryebrook, New York 10573
(herein called the "Executive").

WITNESSETH:

The Corporation and the Executive entered into that certain Employment
Agreement dated January 25, 1996 and made effective as of May 1, 1995 (the
"Prior Employment Agreement"), which provides for the employment of the
Executive by the Corporation upon the terms and conditions set forth therein.

The Corporation and the Executive desire to enter into a new employment
agreement upon the terms and conditions hereinafter set forth, which employment
agreement will supersede and replace the Prior Employment Agreement in its
entirety.

The Corporation recognizes that the longer the Executive remains in the
full time active employ of the Corporation, the more valuable will be any
consultative and advisory services that the Executive may provide during his
full time employment by the Corporation.

The Corporation recognizes that the possibility of a proposal from a third
person, whether solicited by the Corporation or unsolicited, concerning a
possible business combination with the Corporation, including the acquisition of
a substantial share of the equity or voting securities of the Corporation, may
be unsettling to the Executive and deter him from continuing full time
employment with the Corporation.

This Agreement intended to help assure a continuing dedication by the
Executive to his duties to the Corporation notwithstanding the possibility or
occurrence of a business combination proposal.

NOW, THEREFORE,

1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of this
Agreement shall be from May 3, 1998 through and including May 2, 2003. The
Corporation agrees to and does hereby employ the Executive as Chief Executive
Officer and President for the period commencing May 3, 1998 and terminating May
2, 2003 (the "Employment Period") and the Executive agrees that he shall serve
as Chief Executive Officer and President of the Corporation during the
Employment Period. The foregoing notwithstanding, in the event of any "Change in
Control" (as hereinafter defined) of the Corporation at any time during the last
two fiscal years of the Corporation beginning prior to May 2, 2003, the
Employment Period hereunder shall be automatically extended through and
including May 2, 2005.

2. DUTIES. Except as hereinafter provided, the Executive shall during the
Employment Period perform the executive and administrative duties and functions
and shall have the powers and privileges of the Chief Executive Officer and
President of the Corporation, as such duties, functions, powers and privileges
are defined in the By-Laws of the Corporation in effect on the date hereof and
as currently interpreted, and, to the extent not defined therein, as the same
are customarily performed and exercised by a Chief Executive Officer or a
President of a publicly owned corporation incorporated in one of the states of
the United States of America. The Executive shall serve as the Chairman of the
Board of Directors (and a member of the Executive Committee or any similar
committee having powers of the Board of Directors now in existence or hereafter
created) of the Corporation without any additional compensation for such
services for so long as the Executive is elected to serve on the Board, the
Executive Committee or any similar committee. As used in this Agreement, the
term "Corporation" includes each Subsidiary of the Corporation. So long as he is
an officer of the Corporation, the Executive agrees to devote substantially all
his business time to the business and affairs of the Corporation, and to exert
his best efforts in the performance of his duties as an officer, director and
member of any committee of the Board of Directors of the Corporation to which he
may be elected, so as to promote the profit, benefit and advantage of the
business to the Corporation. The Executive agrees to accept the payments to be
made to him under this Agreement as full and complete compensation for the
services required to be performed by him under this Agreement.

(a) BASE SALARY. Beginning May 3, 1998 and until the expiration of the
Employment Period, the Corporation shall pay to the Executive a base salary (the
"Base Salary") at a minimum rate of $800,000 per year, payable in weekly or
bi-weekly installments as nearly equal as may be practicable or otherwise in
accordance with the Corporation's customary payroll practices for its
Executives. Executive's Base Salary shall be reviewed annually and may be
increased at the Corporation's discretion. This Agreement shall not be deemed
abrogated or

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terminated if the Corporation, in its discretion, shall determine to increase
the compensation of the Executive for any period of time or if the Executive
shall accept such increase; but, nothing herein shall be deemed to obligate the
Corporation to make any such increase.

(b) BONUS. The Corporation shall pay to the Executive a signing bonus in an
aggregate amount of $1,000,000, payable in full although earned ratably over the
five-year Employment Period if Executive continues to be employed by the
Corporation at the end of each such year. In addition, during the Employment
Period the Executive shall be entitled to receive annual performance bonuses in
accordance with the terms and conditions of the Corporation's Amended and
Restated 1995 Performance Bonus Plan (the "Bonus Plan") in the form annexed
hereto as Exhibit I, as same may be amended from time to time hereafter in
accordance with its terms. The provisions of the Bonus Plan shall govern the
award of performance bonuses by the Corporation to Executive under the Bonus
Plan, and, to that extent, shall supersede any inconsistent or contrary
provisions contained in the main body of this Agreement. The Corporation may in
its discretion award bonuses to Executive outside of the scope of the Bonus
Plan; but, nothing herein shall be deemed to obligate the Corporation to award
any such bonuses.

(c) PARACHUTE EFFECTIVE DATE. Notwithstanding the present effectiveness of
this Agreement, the provisions of Sections 3(g),(h), and (m) of this Agreement
shall become operative only when, as and if there has been a "Change in
Control" of the Corporation. For purposes of this Agreement, the terms
"Subsidiary" and "Subsidiaries" shall mean each corporation of which more than
50% of the outstanding partial stock entitled to vote for directors is owned
directly or indirectly by the Corporation and a "Change in Control" of the
Corporation shall be deemed to have occurred upon the occurrence of any of the
following events:

(i) A change in control of the direction and administration of the
Corporation's business of a nature that if any securities of the Corporation
were registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), would be required to be reported in response to (a) Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Exchange Act, or (b)
Item 1(a) of Form 8-K under the Exchange Act as each is in effect on the date
hereof and any successor provision of such regulations under the Exchange Act,
whether or not the Corporation is then subject to such reporting requirements;
or

Any "person" or "group" (as such term is used in connection with
Section 13(d) and 14(d)(2) of the Exchange Act) but excluding any employee
benefit plan of the Corporation or any "affiliate" or "associate" of the
Corporation (as defined in Regulation 12b-2 under the Exchange Act)(a) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
fifty percent (50%) or more of the combined voting power of the Corporation's
outstanding securities then entitled ordinarily (and apart from rights accruing
under special circumstances) to vote for the election of directors or (b)
acquires by proxy or otherwise 50% or more of the combined voting securities of
the Corporation having the right to vote for the election of directors of the
Corporation, for any merger or consolidation of the Corporation, or for any
other matter; or

(iii) During any period of twenty-four (24) consecutive months, the

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individuals who at the beginning of such period constitute the Board of
Directors of the Corporation or any individuals who would be "Continuing
Directors" (as hereinafter defined) cease for any reason to constitute at least
a majority thereof; or

(iv) The Corporation shall cease to meet the basic conditions of listing
on the New York Stock Exchange (or any other securities exchange on which the
Corporation's Common Stock, as hereinafter defined, is listed for trading) in
respect of the number of shares of the Corporation's Common Stock held by the
public; or

(v) There shall be consummated (A) any consolidation, merger or
recapitalization of the Corporation or any similar transaction involving the
Corporation, whether or not the Corporation is the continuing or surviving
corporation, pursuant to which shares of the Corporation's common stock, par
value $.01 per share ("Common Stock"), would be converted into cash, securities
or other property, other than a merger of the Corporation in which the holders
of Common Stock immediately prior to the merger have the same proportion and
ownership of common stock of the surviving corporation immediately after the
merger, (B) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets
of the Corporation or (C) the adoption of a plan of complete liquidation of the
Corporation (whether or not in connection with the sale of all or substantially
all of the Corporation's assets) or a series of partial liquidations of the
Corporation that is de jure or de facto part of a plan of complete liquidation
of the Corporation; provided, that the divestiture of less than substantially
all of the assets of the Corporation in one transaction or a series of related
transactions, whether effected by sale, lease, exchange, spin-off, sale of the
stock or merger of a Subsidiary or otherwise, or a transaction solely for the
purpose of reincorporating the Corporation in another jurisdiction, shall not
constitute a "Change in Control"; or

(vi) The Board of Directors of the Corporation shall approve any merger,
consolidation or like business combination or reorganization of the Corporation,
the consummation of which would result in the occurrence of any event described
in Section 3(o)(i), (ii) or (v) above.

(d) DEFINITION OF "CONTINUING DIRECTORS". For purposes of this Agreement,
"Continuing Directors" shall mean the directors of the Corporation in office on
the date hereof and any successor to any such director and any additional
director who after the date hereof (i) was nominated or selected by a majority
of the Continuing Directors in office at the time of his nomination or
selection and (ii) who is not an "affiliate" or "associate" (as defined in
Regulation 12b-2 under the Exchange Act) of any person who is the beneficial
owner, directly or indirectly, of securities representing ten percent (10%) or
more of the combined voting power of the Corporation's outstanding securities
then entitled ordinarily to vote for the election of directors.

(e) TERMINATION RIGHTS UNCHANGED. Except as provided in Section 3(f) below,
nothing in this Agreement shall affect any right which the Executive may
otherwise have to terminate his employment by the Corporation or a Subsidiary,
nor shall anything in this Agreement affect any right which the Corporation or
any Subsidiary may have to terminate the Executive's employment at any time in
any lawful manner, subject to the provision that in the

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<PAGE> 5
event of termination of the Executive's employment under the circumstances
specified in Sections 3(g) and 3(m) below following a Change in Control, the
Corporation will provide to the Executive the payments and benefits described
in Sections 3(g) and 3(m) of this Agreement.

(f) VOLUNTARY TERMINATION. In the event any person or organization
commences a tender or exchange offer, circulates a proxy statement to the
Corporation's stockholders, or takes other steps designed to effect a Change in
Control of the Corporation, the Executive agrees that in order to receive the
benefits provided by this Agreement, he will not voluntarily leave the employ of
the Corporation or any of its Subsidiaries, and will continue to perform his
regular duties and to render the services specified in the recitals of this
Agreement, until such person or organization has abandoned or terminated his or
its efforts to effect a Change in Control or until a Change in Control has
occurred. Should the Executive voluntarily terminate his employment before any
such effort to effect a Change in Control of the Corporation has commenced, or
after any such effort has been abandoned or terminated without effecting a
Change in Control and no such effort is then in process, this Agreement shall
lapse and be of no further force or effect. Should the Executive voluntarily
terminate his employment with the Corporation or any of its Subsidiaries during
such time as any person or organization has commenced, but has not yet
abandoned, any steps designed to effect a Change in Control of the Corporation,
but at a time when a Change in Control has not been effected, the Executive
shall not be entitled to receive any of the benefits of Sections 3(g) and 3(m)
hereof.

(g) TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change in Control of the
Corporation shall have occurred, then Executive shall be entitled to the
benefits provided in Section 3(m) hereof upon the subsequent termination of his
employment by the Corporation or the Executive for any reason or for no reason
within the applicable period set forth in Section 3(m) hereof following such
Change in Control.

(h) TERMINATION BY REASON OF DEATH OR DISABILITY. If the Executive's
employment is terminated by reason of his death or Disability during the two (2)
years following a Change in Control, the Executive shall be entitled to death or
long-term disability benefits, as the case may be, from the Corporation no less
favorable than the most favorable benefits to which he would have been entitled
had the death or termination for Disability occurred at any time during the
period commencing one year prior to the initiation of actions that resulted in a
Change in Control. If prior to any such termination for Disability during the
two (2) years following a Change in Control, the Executive fails to perform his
duties as a result of incapacity due to physical or mental illness, he shall
continue to receive his Base Salary (as defined herein) less any benefits as may
be received by him under the Corporation's or Subsidiary's disability plan until
his employment is terminated for Disability, and shall be entitled to the most
favorable other benefits applicable under the Corporation's policies during the
period commencing one year prior to the initiation of actions that resulted in
the Change in Control.

(i) DEFINITIONS. For purposes of this Agreement:

(i) "Disability" shall mean that, as a result of the Executive's
incapacity due to physical or mental illness, the Executive has been absent
from the full-time

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<PAGE> 6
performance of his duties with the Corporation for six (6) consecutive months
and, within thirty (30) days after Notice of Termination is given to the
Executive, he has not returned to the full-time performance of his duties. Any
question as to the existence of Disability shall be determined by a qualified
independent physician selected by the Executive (or, if he is unable to make
such selection, such selection shall be made by any adult member of the
Executive's family) and approved by the Corporation. The written determination
of such physician shall be final and conclusive for purposes of this Agreement.

(ii) "Retirement" shall mean that the Executive shall have retired
after reaching the earliest normal or early retirement date provided in the
Corporation's retirement plans as then in effect (or if Executive retires after
a Change in Control of the Corporation, as in effect on the date of the Change
in Control).

(iii) "Cause" shall mean:

(A) The willful and continued failure by the Executive to perform
substantially his duties with the Corporation (other than any such failure
resulting from the Executive's incapacity due to physical or mental illness or
any such actual or anticipated failure resulting from termination by the
Executive for Good Reason) which is not cured within thirty (30) days after a
written demand for substantial performance is delivered to the Executive by the
Board of Directors, which demand specifically identifies the manner in which
the Board of Directors believes that the Executive has not substantially
performed his duties; or

(B) The willful engagement in conduct by the Executive which is
demonstrably and materially injurious to the Corporation, monetarily or
otherwise, which is not discontinued within five (5) days after written demand
to cease and desist from such conduct is delivered to the Executive by the
Board of Directors, which demand specifically identifies the conduct which the
Board of Directors believes is injurious to the Corporation; or

(C) Conviction for a felony or other crime punishable by imprisonment
for more than one (1) year, or the entering of a plea of nolo contendere
thereto.

For purposes of this Section 3(i), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him knowing and with the intent that such action or inaction would not
be in the best interests of the Corporation or otherwise was done or omitted to
be done in bad faith.

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<PAGE> 7
(iv) "Base Salary" shall mean the annual base salary paid to the
Executive immediately prior to the Change in Control of the Corporation
(provided that such amount shall in no event be less than the annual base salary
paid to the Executive during the one (1) year period immediately prior to the
Change in Control).

(j) NOTICE OF TERMINATION. Any purported termination of employment by
the Corporation by reason of the Executive's Disability or for Cause, or by the
Executive for any or no reason, shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice given by the Executive or by the Corporation
or a Subsidiary, as the case may be, which shall indicate the specific basis for
termination (if any) and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for determination of any payments under
this Agreement; provided, however, that the Corporation shall not be entitled to
give a Notice of Termination that it is terminating Executive's employment
hereunder with the Corporation or a Subsidiary by reason of Executive's
Disability or for Cause after the expiration of six (6) months following the
last to occur of the events specified by it to constitute Cause or Disability.

(k) DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" shall mean (i) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
the Executive shall not have returned to the full-time performance of his duties
during such thirty (30) day period) or (ii) if the Executive's employment is
terminated by the Corporation for Cause or by the Executive for any or no
reason, the date specified in the Notice of Termination, which shall be not more
than ninety (90) days after such Notice of Termination is given. If within
thirty (30) days after any Notice of Termination is given, the party who
receives such Notice of Termination notifies the other party that a Dispute (as
hereinafter defined) exists, the parties agree to pursue promptly the resolution
of such Dispute with reasonable diligence. Pending the resolution of any such
Dispute, the Corporation or a Subsidiary shall make the payments and provide the
benefits to the Executive provided for in Section 3(m) or Section 5 hereof, as
the case may be. In the event that it is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or the time for appeal therefrom having expired and no appeal having
been perfected), that a challenged termination by the Corporation or a
Subsidiary by reason of the Executive's Disability or for Cause was justified,
then all sums paid by the Corporation or a Subsidiary to the Executive from the
Date of Termination specified in the Notice of Termination until final
resolution of the Dispute pursuant to this Section 3(k) shall be repaid promptly
by the Executive to the Corporation or a Subsidiary, with interest at the base
rate charged from time to time by the Corporation's principal commercial bank.
In the event that it is finally determined that a challenged termination by the
Corporation or a Subsidiary by reason of the Executive's Disability or for Cause
was not justified, then the Executive shall be entitled to retain all sums paid
to the Executive pending resolution of the Dispute.

(l) DEFINITION OF "DISPUTE". For purposes of this Agreement, "Dispute"
shall mean in the case of the Executive's termination as an Executive with the
Corporation or a Subsidiary for Disability or Cause, that the Executive
challenges the existence of Disability or Cause.

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<PAGE> 8

(m) PARACHUTE PAYMENTS UPON TERMINATION; CHANGE OF CONTROL. If within two
(2) years after a Change in Control of the Corporation, the Executive's
employment shall terminate for any or no reason, subject in each case to Section
3(k) hereof, the Corporation or a Subsidiary will pay to the Executive as
compensation for services rendered, beginning not later than the fifth business
day following completion of the "Parachute Procedure" (as hereinafter defined)
if the Corporation elects to follow such procedure and not later than the
fifteenth day after the Date of Termination otherwise:

(i) the Executive's Base Salary through the Date of Termination, any
existing fringe benefits (including medical benefits) and incentive compensation
for the fiscal year in which the termination occurs in accordance with any
arrangements then existing with the Executive and proportionate to the period of
the fiscal year which has expired prior to the termination; and

(ii) a lump sum severance payment equal to 2.99 times the Executive's
average annual compensation during the Base Period (as hereinafter defined)
(subject to any applicable payroll or other taxes and charges required to be
withheld computed at the rate for supplemental payments) provided that in no
event shall "Total Payments" (as hereinafter defined) exceed 2.99 times the
Executive's "Base Amount," as such term is defined in Section 28OG of the
Internal Revenue Code (the "Code"). The Executive's Base Amount shall be
determined in accordance with temporary or final regulations promulgated under
Section 28OG of the Code then in effect, if any. In the absence of such
regulations, if the Executive was not employed by the Corporation (or any
corporation or partnership affiliated with the Corporation (an "Affiliate")
within the meaning of Section 1504 of the Code or a predecessor of the
Corporation) during the entire five calendar years (the "Base Period") preceding
the calendar year in which a Change in Control of the Corporation occurred, the
Executive's average annual compensation for the purposes of such determination
shall be the lesser of (1) the average of the Executive's annual compensation
for the complete calendar years during the Base Period during which the
Executive was so employed or (2) the average of the Executive's annual
compensation for both complete and partial calendar years during the Base Period
during which the Executive was so employed, determined by annualizing any
compensation (other than nonrecurring items) includible in the Executive's gross
income for any partial calendar year or (3) the annual average of the
Executive's total compensation for the Base Period during which the Executive
was so employed, determined by dividing such total compensation by the number of
whole and fractional years included in the Base Period. Compensation payable to
the Executive by the Corporation or any Affiliate or predecessor of the
Corporation shall include every type and form of compensation includible in the
Executive's gross income in respect of the Executive's employment by the
Corporation or any Affiliate or predecessor of the Corporation, including
compensation income recognized as a result of the Executive's exercise of stock
options or sale of the stock so acquired, except to the extent otherwise
provided in temporary or final regulations promulgated under Section 28OG of the
Code. For purposes of this Section 3(m) a "change in control of the Corporation"
shall have the meaning set forth in Section 28OG of the Code and any temporary
or final regulations promulgated thereunder, subject to the limitation stated in

<PAGE> 9
Section 3(m)(iii) below; and

(iii) (A) Notwithstanding anything to the contrary contained herein, in the
event that any portion of the aggregate payments and benefits (the "Total
Payments") received or to be received by the Executive, whether paid or payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Corporation, a Subsidiary or any other person or entity,
would not be deductible in whole or in part by the Corporation, a Subsidiary or
by such other person or entity in the calculation of its Federal income tax by
reason of Section 28OG of the Code, the Total Payments payable shall be reduced
by the least amount necessary so that no portion of the Total Payments would
fail to be deductible by reason of being an "excess parachute payment."

(B) At the option of the Corporation, no payments shall be made
pursuant to this section until the procedure described in this Section 3(m)(iii)
is completed (the "Parachute Procedure"). If the Corporation elects to comply
with such procedure, the Corporation shall cause its independent auditors to
deliver to the Executive, within fifteen (15) days after the Date of
Termination, a statement which shall indicate whether payment to the Executive
of the Total Payments would cause any portion of the Total Payment not to be
deductible in whole or part in the calculation of Federal income tax by reason
of Section 28OG of the Code, or would cause, directly or indirectly, an "excess
parachute payment" to exist within the meaning of Section 28OG of the Code. Such
statement shall set forth the value, calculated in accordance with the
principles of Section 28OG of the Code and any temporary or final regulations
promulgated thereunder, of any non-cash benefits or any deferred or contingent
payment or benefit payable pursuant to the terms of this Agreement or any other
plan, arrangement or benefit, together with sufficient information to enable the
Corporation to determine the payments that may be made to the Executive without
resulting in a loss of deduction under Section 28OG of the Code or an "excess
parachute payment" to the Executive within the meaning of Section 28OG of the
Code. The Corporation warrants to the Executive the accuracy of all information
and calculations supplied to the Executive in such statement. If such statement
indicates that payment of the Total Payments would result in a loss of a
deduction by reason of Section 28OG of the Code or would cause an "excess
parachute payment" to exist within the meaning of Section 28OG of the Code, the
Executive shall, within thirty (30) days after receipt of the statement, deliver
to the Corporation a statement indicating which of the payments and benefits
specified in such auditor's statement the Executive elects to receive; provided,
however, that the payments and benefits selected by the Executive shall not
result in a loss of deduction under Section 28OG of the Code or an "excess
parachute payment" to the Executive within the meaning of Section 28OG of the
Code and, provided, further, however, that if the Corporation does not comply
with the Parachute Procedure, it shall deliver the payments required by this
Section 3(m) within fifteen (15) days after the Date of Termination. Delivery of
the statement by the Executive to the Corporation shall constitute completion of
the Parachute Procedures; and

(iv) The Corporation shall contest any improper assessment of an

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<PAGE> 10
excise or other tax imposed as a result of determination that an "excess
parachute payment" has been made to the Executive within the meaning of Section
28OG of the Code. If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that
an "excess parachute payment" does in fact exist, within the meaning of Section
28OG of the Code, then the Executive shall pay to the Corporation, upon demand,
an amount not to exceed the sum of (i) the excess of the aggregate Total
Payments over the aggregate Total Payments that would have been paid without any
portion of such payment being deemed an "excess parachute payment" within the
meaning of Section 28OG of the Code and (ii) interest on the amount set forth in
clause (i) above at the applicable federal rate specified in Section 1274(d) of
the Code from the date of receipt by the Executive of such excess until the date
of such repayment.

4. BENEFITS. (a) The executive shall be entitled to participate in any
life, accident, disability and health insurance, hospitalization or any other
plan or benefits afforded by the Corporation to its executives generally, if and
to the extent that the Executive is eligible to participate in accordance with
the provisions of any such plan or for such benefits. Nothing herein is
intended, or shall be construed, to require the Corporation to institute any,
or any particular, plan or benefits. In addition, the Executive shall be
furnished with an automobile lease allowance of $2,250 per month during the
Employment Period plus reimbursement for reasonable insurance, maintenance,
gasoline and parking expenses incurred in furtherance of the Corporation's
business.

(b) The Corporation shall maintain in effect during the Employment
Period a term life insurance policy on the life of Executive in a declining
amount equal to any one time to the aggregate Base Salary payable hereunder over
the then unexpired balance of the Employment Period. In addition, the
Corporation shall maintain in effect during the Employment Period disability
insurance for the benefit of Executive covering, in the event this Agreement is
terminated on account of Executive's Disability, 100% of Executive's Base Salary
through the end of the Employment Period less any benefits as may be received by
him during such time under the Corporation's other disability plans. In
connection therewith, Executive shall, at such time or times and at such place
or places as the Corporation may reasonably direct, subject himself to such
physical examination and execute and deliver such documents as the Corporation
may deem necessary.

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effective as of the Date of Termination, and shall be entitled to receive
solely all amounts and benefits to be paid or provided by the Corporation under
Sections 3(a), 3(b) and 4 of this Agreement up to the Date of Termination and
any other amounts to be paid thereafter to Executive or his beneficiaries
pursuant to any deferred compensation plan or other employee benefit plan or
program in effect on the Date of Termination, to the extent he remains eligible
to participate thereunder under the terms of the Corporation's applicable
policies and plans. The provisions of this Section 5 shall terminate and cease
to be of any force or effect immediately upon any Change in Control of the
Corporation.

6. (a) COMPLETE PAYMENT. Upon the payment of the amounts provided in
this Agreement, the Corporation shall have no further liability of any kind or
nature whatsoever to the Executive under this Agreement, except such liability,
if any, as may continue under any plan or for the benefits (in accordance with
the express terms hereof) referred to in Section 4 hereof. Notwithstanding the
foregoing, Executive expressly reserves any rights he may have at law, equity or
otherwise in the event that his employment by the Corporation is terminated in
contravention of this Agreement.

(b) NON-COMPETITION. The Executive expressly covenants and agrees
that during the term of this Agreement he will not, directly or indirectly, own,
manage, operate, join, control or participate in or be connected with as an
officer, employee, partner, stockholder, or otherwise, any business, individual,
partnership, firm or corporation (other than a parent of the Corporation or a
subsidiary or affiliate of such parent), which is at the time engaged wholly or
partly, in the business of manufacturing and marketing packaging products or in
any business which is directly in competition with the then business of the
Corporation or any subsidiary or affiliate of the Corporation (as defined in the
General Rules and Regulations promulgated under the Securities and Exchange Act
of 1934), or any firm, partnership or corporation which shall succeed to all or
a substantial part of the business of the Corporation, or any such subsidiary or
affiliate.

(c) INVESTMENTS. Nothing in this Agreement is intended, or shall be
construed, to prevent the Executive during the term of his employment hereunder
from investing in the stock or other securities listed on a national securities
exchange or actively traded on the over-the-counter market of any corporation
which is at the time engaged wholly or partly in any business which is, directly
or indirectly, at the time, in competition with the business of the Corporation
or any such subsidiary or affiliate, or any firm, partnership, or corporation
which shall succeed to all or a substantial part of the business of the
Corporation, or any such subsidiary or affiliate, provided that the Executive
and direct members of his family living in the same household as the Executive
shall not directly or indirectly, hold, beneficially or otherwise, in the
aggregate, more than three percent of any issue of such stock or other
securities of any one such corporation.

(d) CONFIDENTIAL INFORMATION. The Executive expressly covenants and
agrees that he will not any time, during the term of his employment hereunder or
thereafter and

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without regard to when or for what reason, if any, such employment shall
terminate, directly or indirectly, use or permit the use of any trade secrets,
customers' lists or other information of, or relating to, the Corporation, or
any Subsidiary or affiliate, in connection with any activity or business,
except the business of the Corporation or any Subsidiary or affiliate of the
Corporation, and will not divulge such trade secrets, customers' lists, and
information to any person, firm, or corporation whatsoever, except as may be
necessary in the performance of his duties hereunder.

(e) REMEDIES. It is expressly understood and agreed that the
services to be rendered hereunder by the Executive are special, unique, and of
extraordinary character, and in the event of the breach by the Executive of any
of the terms and conditions of this Agreement on his part to be performed
hereunder, including, but not limited to, the terms and provisions of
subparagraphs (b) or (d) of this Section, then the Corporation shall be
entitled, if it so elects, to institute and prosecute any proceedings in any
court of competent jurisdiction, either in law or equity, for such relief as it
deems appropriate, including, without limiting the generality of the foregoing,
any proceedings, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Executive or to enjoin the
Executive from performing services for any other person, firm or corporation.

7. SEVERABILITY. The invalidity or unenforceability of any
provisions of this Agreement in any circumstance shall not affect the validity
or enforceability of such provision in any other circumstance or the validity or
enforceability of any other provision of this Agreement, and except to the
extent such provision is invalid or unenforceable, this Agreement shall remain
in full force and effect. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof in such jurisdiction, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

8. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail,
to his then residence in the case of the Executive or to its principal office in
the case of the Corporation, and shall be deemed given when deposited in the
United States mails, postage prepaid.

9. SUCCESSORS. The rights and obligations of the Corporation
under this Agreement shall inure to the benefit of and shall be binding upon any
successor of the Corporation or to the business of the Corporation. Neither this
Agreement or any rights or obligations of the Executive hereunder shall be
transferable or assignable by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to the Executive hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee
or other designee or, if there is no such designee, to the Executive's estate.

10. ATTORNEYS' FEES. If litigation shall be brought to enforce
or interpret any

<PAGE> 13
provision contained herein, the Corporation shall indemnify the Executive for
his attorneys' fees and disbursements incurred in such litigation and pay
prejudgment interest on any money judgment obtained by the Executive calculated
at the base rate of interest charged from time to time from the date that
payment should have been made under this Agreement; provided, however, that the
Executive shall not have been found by the court to have had no cause to bring
the action, or to have acted in bad faith, which findings must be final with the
time to appeal therefrom having expired and no appeal having been taken.

11. OBLIGATION TO PAY COMPENSATION. The Corporation's obligation to
pay the Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Corporation may have against the
Executive or anyone else. All amounts payable by the Corporation hereunder shall
be paid without notice or demand. Except as expressly provided herein, the
Corporation waives all rights it may now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement
in whole or in part. Except as otherwise provided herein, each and every payment
made hereunder by the Corporation shall be final and the Corporation will not
seek to recover for any reason all or any part of such payment from the
Executive or any person entitled thereto. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment, and if Executive obtains such other employment, any
compensation earned by Executive pursuant thereto shall not be applied to
mitigate any payment made to Executive pursuant to this Agreement.

12. SUCCESSORS BOUND BY AGREEMENT. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation, by written agreement, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. As used in this
Agreement, the term "Corporation" shall mean the Corporation as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement required by this Section 12, or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.

13. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the Executive and the Corporation concerning the subject
matter hereof and supersedes all prior agreements between the parties with
respect thereto. In the event that Executive's employment is terminated
subsequent to a Change in Control as provided herein, performance by the
Corporation of its obligations hereunder shall constitute full settlement and
release of any claim or cause of action, of whatsoever nature, which the
Executive might otherwise assert or claim against the Corporation or any of its
directors, stockholders, officers or employees on account of such termination.
No provisions of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing, signed by the
Executive and an authorized officer of the Corporation. No waiver by either
party hereto at any time of any breach by the other party hereto of compliance
with an condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of any similar or

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<PAGE> 14
dissimilar provision or condition at such same or at any prior or subsequent
time. No assurances or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. However, this Agreement is in
addition to and not in lieu or any other plan providing for payments to or
benefits for the Executive or any agreement now existing or which hereafter may
be entered into between the Corporation and the Executive, provided that,
notwithstanding anything to the contrary contained in the terms of any such
plan or agreement, in the event of Executive's termination, within (2) years
after a Change in Control as provided herein, of Executive's employment, this
Agreement shall govern the rights and the obligations of the Corporation and
the Executive. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the provisions, principles, or policies thereof relating to
choice or conflict of laws.

14. MISCELLANEOUS. The masculine or neuter gender shall include the
feminine gender. This Agreement may be executed in more than one counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement
in duplicate original on the 10th day of November 1999 effective as of May 3,
1998.

SHOREWOOD PACKAGING CORPORATION

By: /s/ Howard M. Liebman
---------------------------
Howard M. Liebman
President

/s/ Marc P. Shore
---------------------------
Marc P. Shore

<PAGE> 1
Exhibit 11

SHOREWOOD PACKAGING CORPORATION

---------------------

EMPLOYEE
NON-QUALIFIED STOCK OPTION AGREEMENT

NON-QUALIFIED STOCK OPTION AGREEMENT made as of April 17, 1997, between
Shorewood Packaging Corporation, a Delaware corporation (the "Company"), and
Marc P. Shore (the "Optionee").

WHEREAS, the Stock Option and Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") has determined that it
is in the best interests of the Company and its stockholders to grant to the
Optionee non-qualified stock options to purchase 150,000 shares of its common
stock, par value $.01 per share (the "Common Stock"), in recognition of the
Optionee's services to the Company as its Chairman, Chief Executive Officer and
President, upon the terms and conditions set forth herein.

NOW, THEREFORE, the Company and the Optionee hereby agree as follows:

1. Grant of Options. The Company grants to the Optionee, on the terms and
conditions hereinafter set forth, non-qualified stock options (the "Options") to
purchase 150,000 shares of the Common Stock (the "Option Shares").

2. Exercise Price. The exercise price (the "Exercise Price") of the Options
is $18.125 per Share, subject to adjustment as provided in Section 17 hereof.

3. Tax Treatment. Optionee understands that the Options granted under this
Agreement are not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended to date and as may be amended from
time to time.

4. Exercise Period of Options. The Options shall be exercisable, in whole
or in part, at any time during the period commencing on the date hereof and
expiring ten (10) years from the date hereof (the "Exercise Period"). All rights
of the Optionee in the Options, to the extent that they have not been exercised,
shall terminate upon expiration of the Exercise Period.

5. Exercise of Options. The Options may be exercised only by delivering or
transmitting by registered or certified mail to the Secretary or the Treasurer
of the Company, at the Company's then principal office, a written notice signed
by the Optionee specifying the number of Option Shares that the Optionee has
irrevocably elected to purchase. The notice must be accompanied by cash or other
immediately available funds in the amount of, or shares of Common Stock already
owned by the Optionee, held by the Optionee for a minimum of six (6) months and
having a fair market value on the date of exercise equal to, or any combination
of cash or other immediately available funds and shares of Common Stock equal
to, the aggregate amount of the Exercise Price for such number of Option Shares.
Upon receipt of such notice and
<PAGE> 2
payment, the Company shall deliver to the Optionee a certificate or certificates
in respect of the shares of Common Stock purchased and the Optionee shall be
deemed to be the holder of the shares of Common Stock purchased as of the date
of issuance to him of the certificates for such shares. The Company may delay
issuing certificates representing Option Shares for a reasonable period of time
pending listing of same on the NASDAQ Stock Market or the New York Stock
Exchange if shares of Common Stock of the Company are then listed on such
Exchange. The Optionee will not be nor deemed to be a holder of any shares
subject to the Options unless and until certificates for such shares are issued
to him under the terms of this Agreement.

6. Restrictive Legend. If and when the Options are exercised, the
certificates to be issued evidencing shares of the Company's Common Stock shall
bear a legend substantially as follows:

"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be
transferred in the absence of an effective registration statement under the
Act covering the shares or of an opinion of counsel to the Company that
such transfer will not require registration of such shares under the Act."

7. Death of Optionee. Options granted hereunder and outstanding on the date
of Optionee's death may be exercised by the personal representative of the
Optionee or the person or persons to whom the Options shall have been
transferred by the Optionee's will or in accordance with the laws of descent and
distribution, as the case may be, at any time prior to the termination of such
Options pursuant to Section 4 above.

8. No Stockholders' Rights for Options. The Optionee shall have no rights
as a stockholder with respect to the Option Shares until the date of the
issuance to the Optionee of a stock certificate or certificates therefor, and no
adjustment will be made for cash dividends or other rights for which the record
date is prior to the date of issuance of such certificate(s).

9. Demand Registration. At any time prior to the tenth anniversary hereof,
the Optionee shall have the right exercisable by written notice to the Company
(the "Demand Request"), to have the Company prepare and file with the Securities
and Exchange Commission (the "SEC"), on no more than one (subject to Section 11
below) occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of the Company counsel, to comply
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), so as to permit a public offering and sale of the Option Shares.
Notwithstanding anything else herein contained, the Company will have no
obligation to prepare and file a registration statement under the Securities Act
pursuant to this Section 9 other than on Form S-3 if available to the Company
(or the equivalent thereto if such form is no longer generally available). The
Company shall be entitled to postpone for up to six (6) months the filing of any
registration statement otherwise required to be prepared and filed by the
Company pursuant to this Section 9 if at the time the Company receives a request
for registration the Board of Directors of the Company determines in its
reasonable business judgment, that the filing of such registration statement and
the offering of the Option Shares pursuant thereto would interfere

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<PAGE> 3
with any financing, acquisition, corporate reorganization or other material
transaction by the Company, and the Company promptly gives the Optionee notice
of such determination and postponement. If the Company shall so postpone the
filing of a registration statement, the Optionee shall have the right to
withdraw the request for registration by giving written notice to the Company
within fifteen (15) days after receipt of the Company's notice of postponement
(and, in the event of such withdrawal, such request shall not be deemed a
request for registration which may be made pursuant to this Section 9).
Notwithstanding the foregoing, the Company will have no obligation to prepare
and file a registration statement under the Securities Act, if to do so would
require a special audit of the Company's balance sheet and related financial
statements in connection with the preparation of the registration statement,
even if, as a result, the filing of the registration statement would be delayed
until after the completion of the Company's next regular audit.

10. Piggy-Back Registration. If at any time the Company proposes to file a
registration statement to register any Common Stock (other than Common Stock
issued with respect to any acquisition or any employee stock option, stock
purchase or similar plan) under the Securities Act for sale to the public in an
underwritten offering, it will at each such time give written notice to the
Optionee of its intention to do so ("Notice of Intent") and, upon the written
request of the Optionee (the "Piggy-Back Request") made within 30 calendar days
after the receipt of any such notice (which request must specify that the
Optionee intends to dispose of all of the Option Shares held by the Optionee on
the date the Notice of Intent is received by the Optionee), the Company will use
its best efforts to effect the registration under the Securities Act of the
Option Shares which the Company has been so requested to register; provided,
however, that if the managing underwriter shall certify in writing that
inclusion of all or any of the Option Shares would, in such managing
underwriter's opinion, materially interfere with the proposed distribution and
marketing of the Common Stock in respect of which registration was originally to
be effected (such writing to state the basis of such opinion and the maximum
number of shares which may be distributed without such interference), then the
Company may, upon written notice to the Optionee, have the right to exclude from
such registration such number of Option Shares which it would otherwise be
required to register hereunder as is necessary to reduce the total amount of
Common Stock to be so registered to the maximum amount which can be so marketed.

11. Combined Exercise and Registration Request. If at or before the date of
a Demand Request or a Piggy-Back Request, the Optionee shall not have exercised
the Options in accordance with the terms of Sections 4 and 5 hereof, such Demand
Request or Piggy-Back Request, as the case may be, shall be deemed to be a
notice of exercise by the Optionee pursuant to the first sentence of Section 5
and an agreement to pay to the Company the full amount required by the terms
hereof on or before the earlier of the termination of the Options or the date
when a registration statement filed by the Company pursuant to Section 9 or
Section 10 becomes effective under the Securities Act (the "Effective Date").
Notwithstanding the foregoing, at any time before the Company requests the SEC
to accelerate the Effective Date of a registration statement filed pursuant to
Section 9 or Section 10 hereof, the Optionee may, by delivery of a written
notice to the Company, withdraw its Demand Request or Piggy-Back Request, as the
case may be, and upon delivery of such withdrawal notice such Demand Request or
Piggy-Back

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<PAGE> 4
Request, as the case may be, shall be deemed to be null and void and the
Optionee shall continue to have the rights granted in Sections 5, 9 and 10
hereof, within the time limits provided therein, to the same extent as if no
Demand Request or Piggy-Back Request had been made and no notice of exercise of
this warrant had been delivered; provided, however, that if the Demand Request
or Piggy-Back Request, as the case may be, is delivered to the Company before
the expiration of the Exercise Period and the Optionee has not before then
otherwise exercised the Options pursuant to the terms hereof, the Optionee may,
at his election include with such withdrawal notice the payment required
hereunder and the Company shall deliver to the Optionee a stock certificate or
stock certificates in accordance with the provisions of Section 5 hereof.

12. Registration Expenses. The costs and expenses (other than underwriting
discounts and commissions) of all registrations and qualifications under the
Securities Act, and of all other actions the Company is required to take or
effect pursuant to this Agreement shall be paid by the Company (including,
without limitation, all registration and filing fees, printing expenses, fees
and expenses of complying with Blue Sky laws, and fees and disbursements of
counsel for the Company and of independent public accountants); provided,
however, that fees and expenses of complying with Blue Sky laws in those states
where Option Shares and no other securities of the Company covered by the
registration statement will be offered for sale shall be paid by the Optionee.

13. Registration Procedures. If and whenever the Company is required to
effect the registration of any Option Shares under the Securities Act as
provided in this Agreement, the Company will promptly:

(i) prepare and file with the SEC a registration statement with
respect to such Option Shares and use its best efforts to cause such
registration statement to become effective;

(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
such Option Shares and other securities covered by such registration statement
until such time as all of such Option Shares and other securities have been
disposed of in accordance with such registration statement, but in no event for
a period of more than nine months after such registration statement becomes
effective;

(iii) furnish to the Optionee such number of copies of such
registration statement and of each such amendment and supplement thereto, such
number of copies of the prospectus included in such registration statement, in
conformity with the requirements of the Securities Act;

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<PAGE> 5
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, to subject itself to taxation in
any such jurisdiction.

The Company may require the Optionee to furnish the Company such
information regarding the Optionee and the distribution of such Option Shares as
the Company may from time to time request in writing and as shall be required by
law to effect such registration.

14. Termination of Obligations. The obligations of the Company imposed by
Sections 9 through 13 above shall cease and terminate, as to any particular
Option Shares, when such shares shall have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering such securities.

15. Availability of Information. The Company will cooperate with the
Optionee in supplying such information and documentation as may be necessary for
him to complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption from the
Securities Act for the sale of any Option Shares.

16. Registration Rights Condition. Notwithstanding any other provision
contained herein, the Company shall not be obligated to comply with any demands
for registration of any Option Shares under the Securities Act if, at the time
of such demand by the Optionee:

(i) the Optionee is free to sell such Option Shares in accordance with
Rule 144 promulgated under the Securities Act or any similar rule or regulation
promulgated under the Securities Act; or

(ii) the Company has in effect a registration statement covering the
disposition of such Option Shares.

17. Dilution or Other Adjustments. In the event of any change in the Common
Stock subject to the Options granted by this Agreement through merger,
consolidation, reorganization, recapitalization, stock split, stock dividend, or
the issuance to stockholders of rights to subscribe to stock of the same class,
or in the event of any change in the capital structure or other increase or
decrease in the number of issued shares of Common Stock effected without the
receipt of consideration by the Company, the Board of Directors of the Company
shall make such adjustments with respect to (i) the number of Option Shares,
(ii) the Exercise Price, or (iii) any provision of this Agreement, as it may
deem equitable in order to prevent dilution or enlargement of the Options and
the rights granted hereunder.

18. Miscellaneous.

18.1 The interpretation of this Agreement by the Compensation
Committee shall be binding on the Optionee.

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<PAGE> 6
18.2 The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York without
giving effect to the provisions, principles or policies thereof relating to
choice or conflict of law.

18.3 Any and all notices referred to herein shall be sufficient if
furnished in writing and delivered in person or mailed by certified mail (return
receipt requested) to the respective parties at their addresses set forth above
or to such other address as either party may from time to time designate in
writing.

18.4 No amendment, change or modification of this document shall be
valid unless in writing and signed by all of the parties hereto.

18.5 No reliance upon or waiver of one or more provisions of this
Agreement shall constitute a waiver of any other provisions hereof.

18.6 All of the terms and provisions contained herein shall inure to
the benefit of and shall be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns.

18.7 This Agreement constitutes the entire understanding and agreement
of the parties with respect to the subject matter of this Agreement, and
supersedes any and all prior agreements, understandings or representations.

IN WITNESS WHEREOF, the Company and the Optionee have duly executed
this Agreement as of the day and year first above written.

SHOREWOOD PACKAGING CORPORATION

By: ______________________________
Name:
Title:

___________________________________
MARC P. SHORE

<PAGE> 1
Exhibit 12

EMPLOYMENT AGREEMENT

LEONARD VEREBAY

WITH

SHOREWOOD PACKAGING CORPORATION

AGREEMENT made effective as of October 30, 1998, between
Shorewood Packaging Corporation, a Delaware corporation having its principal
executive offices at 277 Park Avenue, New York, N.Y., 10172-0124 (herein called
the "Corporation"), and Leonard Verebay currently residing at 6521 Woodworth
Court, Indianapolis, IN 46237 (herein called the "Executive").

W I T N E S S E T H

The Corporation has acquired the assets of Queens Group, Inc.,
the former employer of the Executive.

The Corporation recognizes that the Executive possesses
extensive knowledge and skill in the business of his former employer and
recognizes that this expertise is essential to an orderly transaction.

This Agreement is intended to provide the Corporation with the
exclusive benefit of the Executive's skill and experience for the term hereof.

Accordingly, the parties desire to and do hereby enter into
this Agreement as of the date first set forth above.

NOW, THEREFORE,

1. EMPLOYMENT

(a) EMPLOYMENT PERIOD. The Corporation agrees to and does hereby
employ the Executive as Executive Vice President of the
Corporation for the period commencing October 30, 1998 and
terminating December 31, 2001, unless earlier terminated
pursuant to Section 6 below (the "Employment Period"), and the
Executive agrees that he shall serve as Executive Vice
President of the Corporation during the Employment Period.

<PAGE> 2
interpreted, and, to the extent not defined therein, as the
same are customarily performed and exercised by an Executive
Vice President of a publicly owned corporation incorporated in
one of the states of the United States of America. If so
elected, the Executive shall, during the Employment Period,
serve as a member of the Board of Directors (and of the
Executive Committee or any similar committee having powers of
the Board of Directors now in existence or hereafter created)
of the Corporation without any additional compensation for
such services for so long as the Executive is elected to serve
on the Board, the Executive Committee or any similar
committee. As used in this Agreement, the term "Corporation"
includes each Subsidiary of the Corporation. So long as he is
an officer of the Corporation, the Executive agrees to devote
substantially all his business time to the business and
affairs of the Corporation, and to exert his best efforts in
the performance of his duties as an officer, director and
member of any committee of the Board of Directors of the
Corporation to which he may be elected, so as to promote the
profit, benefit and advantage of the business to the
Corporation. Notwithstanding the foregoing, the Corporation
acknowledges that Executive is a stockholder, and serves on
the board of directors, of each of Oliver Trucking Corporation
and Q2 Marketing, Inc. (the "Other Interests") and agrees that
Executive may devote that portion of his business time not
required to be devoted to the business and affairs of the
Corporation as provided above to such Other Interests,
provided that (i) neither such activities nor the time devoted
thereto by Executive interfere with the duties to be performed
by Executive hereunder and (ii) in no event shall Executive
assume an active role in the day-to-day management of Oliver
Trucking Corporation or Q2 Marketing, Inc. As used in this
Agreement, the term "Q2 Marketing, Inc." shall mean Q2
Marketing, Inc. and its successors and assigns.

(c) EMPLOYMENT COMPENSATION. As compensation for the services to
be rendered by the Executive during the Employment Period,
subject to the conditions herein stated, the Corporation
agrees to pay to the Executive all of the following:

(i) BASE SALARY. Beginning October 30, 1998 and until the
expiration of the Employment Period, the Corporation
shall pay to the Executive a base salary (the "Base
Salary") at a minimum rate of $500,000 per year,
payable in weekly or bi-weekly installments as nearly
equal as may be practicable or otherwise in
accordance with the Corporation's customary payroll
practices for its executives generally. Executive's
Base Salary shall be reviewed annually during the
Employment Period and may be increased at the
Corporation's discretion. This Agreement shall not be
deemed abrogated or terminated if the Corporation, in
its discretion, shall determine to increase the
compensation of the Executive for any period of time
or if the Executive shall accept such increase; but,
nothing herein shall be deemed to obligate the
Corporation to make any such increase.

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<PAGE> 3
(ii) BENEFITS. During the Employment Period, the Executive
shall be entitled to participate in any life
insurance, pension, stock, bonus, profit sharing,
accident and health insurance, hospitalization,
vacation or any other plan or benefits afforded by
the Corporation to its executives generally, if and
to the extent that the Executive is eligible to
participate in accordance with the provisions of any
such plan or for such benefits. Nothing herein is
intended, or shall be construed, to require the
Corporation to institute any, or any particular, plan
or benefits. In addition, the Executive shall be
furnished with an automobile lease allowance of
$1,000 per month during the Employment Period plus
reimbursement for reasonable automobile insurance,
maintenance and gasoline expenses.

2. CONSULTING SERVICES.

(a) CONSULTING PERIOD. If the Executive's employment is not
terminated prior to the natural expiration of the Employment
Period pursuant to Section 6 hereof, the Corporation agrees to
engage the Executive as a consultant for the period commencing
on December 31, 2001 and terminating on December 31, 2006,
unless earlier terminated pursuant to Section 6 below (the
"Consulting Period") and the Executive agrees to serve as a
consultant to the Corporation during the Consulting Period.

(b) CONSULTING DUTIES. During the Consulting Period, Executive
shall provide general advisory and strategic services at the
direction of and to the Corporation and perform such other
duties as the Chief Executive Officer of the Corporation shall
from time to time request. Executive shall devote such time,
attention, skill, energy and efforts as may be necessary for
the faithful performance of his consulting obligations
hereunder during the Consulting Period, subject to a maximum
commitment of six (6) business days per year (prorated in
respect of lesser periods), and such consulting obligations
may be rendered by telephone.

(c) CONSULTING FEES. For all services rendered by the Executive
during the Consulting Period, the Corporation shall pay
Executive Ten Thousand Dollars ($10,000) per annum, payable
weekly or biweekly in the Corporation's sole discretion.
Additionally, Executive shall participate in the Corporation's
group family medical insurance plan on the same basis as other
plan participants, if and to the extent the Executive is then
eligible to participate in accordance with the provisions of
such plan, and shall also be furnished with an automobile
lease allowance of $1,000 per month during the Consulting
Period plus reimbursement for reasonable automobile insurance,
maintenance and gasoline expenses.

(d) NATURE OF RELATIONSHIP. The parties hereto acknowledge and
agree that this Agreement, in and of itself, is not intended
to create an employer/employee relationship between the
Corporation and the Executive during the Consulting Period.
During the Consulting Period, Executive shall not, solely as a
result of

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<PAGE> 4
this Agreement, be considered an employee of the
Corporation and shall not, solely as a result of this
Agreement, be entitled to participate in any plans,
arrangements, or distributions by the Corporation pertaining
to or in connection with any pension, stock, bonus,
profit-sharing or similar benefits for its regular employees
and shall have no right or authority, without the express
written consent of the Corporation, to bind or act on behalf
of the Corporation with respect to any matter whatsoever. The
Executive shall be responsible for all taxes related to his
service as a consultant hereunder.

3. RELOCATION. The Executive shall not be required to relocate his current
place of employment in Indiana. The Executive acknowledges, however,
that significant domestic and international travel may be required as
part of his duties hereunder and the Executive agrees to undertake such
travel as may be reasonably required by the business of the Corporation
from time to time.

4. REIMBURSEMENT FOR EXPENSES. The Executive shall be reimbursed by the
Corporation for all reasonable traveling and other expenses actually
and properly incurred and documented by the Executive in connection
with his duties during the Employment Period and the Consulting Period.
For all such expenses, the Executive shall furnish to the Corporation
statements and vouchers to the reasonable satisfaction of the
Corporation.

5. COMPLETE PAYMENT. The Executive agrees to accept the payments to be
made to him under this Agreement as full and complete compensation for
the services required to be performed by him under this Agreement. Upon
the payment of the amounts provided in this Agreement, the Corporation
shall have no further liability of any kind or nature whatsoever to the
Executive under this Agreement, except such liability, if any, as may
continue under any plan or for the benefits (in accordance with the
express terms hereof) referred to in Sections 1(c)(ii) and 2(c) hereof.
Notwithstanding the foregoing, Executive expressly reserves any rights
he may have at law, equity or otherwise in the event that his
employment or his consulting engagement by the Corporation is
terminated in contravention of this Agreement.

6. EARLY TERMINATION.

(a) TERM. This Agreement shall commence on the date first written
above and shall continue until the eight year anniversary of
such date (the "Term").

(b) TERMINATION. If prior to the expiration of the Term (a) the
Executive fails because of Disability (defined below) to
perform services of the character contemplated by Section 1(b)
above during the Employment Period or the services
contemplated in Section 2(b) above during the Consulting
Period; or (b) if the Corporation's Board of Directors
determines that, during the Employment Period or the
Consulting Period, the Executive has been grossly negligent in
the performance of his duties, has willfully neglected his
duties, has been dishonest with respect to the business of the
Corporation or has been

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<PAGE> 5
convicted of any misdemeanor relating to the business of the
Corporation or any felony, has willfully disobeyed the
Corporation's rules, instructions or orders or has breached in
any material respect any of his covenants herein contained
(any such conduct, to be referred to as "Objectionable
Conduct"); then, the Corporation may by written "Notice of
Termination" (defined below) specifying the Objectionable
Conduct terminate Executive's employment or consulting
engagement, as the case may be, unless the Objectionable
Conduct is capable of being cured and is cured by the
Executive to the reasonable satisfaction of the Corporation
within twenty (20) days of the Corporation's delivery of the
Notice of Termination. In addition, Executive's employment or
consulting engagement, as the case may be, shall terminate
immediately upon the death of Executive. Further, upon thirty
(30) days written notice to the Corporation, Executive may
terminate his employment or consulting engagement, as the case
may be, at any time within ninety (90) days after the
occurrence of a Capital Transaction (as defined below) or any
Change of Control (as defined below). Upon any termination of
the Executive's employment under this Section 6, the Executive
shall be deemed removed from all positions held by him with
the Corporation, its subsidiaries and affiliates, effective as
of the "Date of Termination" (defined below) and any
termination of the Executive's consulting engagement pursuant
to this Section 6 shall be deemed effective as of the "Date of
Termination." Upon any termination of the Executive's
employment or consulting engagement under this Section 6, the
Executive shall be entitled to receive solely all amounts and
benefits to be paid or provided by the Corporation under
Section 1(c) above, in the case of termination of his
employment, and Section 2(c) above, in the case of termination
of his consulting engagement, up to the Date of Termination.

(i) "Date of Termination" shall mean, (x) in respect of
any termination of Executive's employment or
consulting engagement by reason of death, the date of
death, (y) in respect of any termination of
Executive's employment by reason of Disability,
thirty (30) days after the Notice of Termination is
given to Executive (provided that Executive shall not
have returned to the full performance of his
applicable duties during such thirty (30) day period)
and (z) in respect of any termination of Executive's
employment or consulting engagement by reason of
Objectionable Conduct, immediately upon the
Corporation's delivery of the Notice of Termination
to Executive, unless such Objectionable Conduct is
capable of being cured in which case "Date of
Termination" shall mean twenty (20) days after the
Corporation's delivery of the Notice of Termination
to Executive (provided Executive has not cured the
Objectionable Conduct within such twenty (20) day
period).

(ii) "Disability" shall mean that, as a result of the
Executive's incapacity due to physical or mental
illness, the Executive is unable to substantially

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<PAGE> 6
perform his duties (as described in Sections 1(b) and
2(b) hereof, as applicable) with the Corporation for
six (6) consecutive months and, within thirty (30)
days after Notice of Termination is given to the
Executive, he has not returned to the substantial
performance of his duties (as described in Sections
1(b) and 2(b) hereof, as applicable). Any question as
to the existence of Disability shall be determined by
a qualified independent physician selected by the
Executive (or, if he is unable to make such
selection, such selection shall be made by any adult
member of the Executive's family) and approved by the
Corporation whose approval shall not be unreasonably
withheld. The written determination of such physician
shall be final and conclusive for purposes of this
Agreement.

(iii) "Notice of Termination" shall mean a notice given by
the Corporation to Executive which shall indicate the
specific basis for termination and shall set forth in
reasonable detail the facts and circumstances claimed
to provide a basis for determination of any payments
due under this Agreement; provided, however, that the
Corporation shall not be entitled to give a Notice of
Termination that it is terminating Executive's
employment after the expiration of six (6) months
following the last to occur of the events
constituting the basis for such termination.

(iv) "Capital Transaction" shall mean with respect to the
Corporation the transaction underlying any of the
following events: (i) the stockholders of the
Corporation approve a merger, consolidation or other
combination of the Corporation with any other
company, other than (1) a merger, consolidation or
other combination which would result in the voting
securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more than
50% of the combined voting power of the voting
securities of the Corporation or such surviving
entity outstanding immediately after such merger,
consolidation or other combination or (2) a merger or
consolidation effected to implement a
recapitalization of the Corporation (or similar
transaction) in which no "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange
Act")) acquires more than 50% of the combined voting
power of the Corporation's then outstanding
securities; or (ii) the stockholders of the
Corporation approve an agreement for the sale or
disposition by the Corporation of all or
substantially all of the Corporation's assets and
properties to any Person (as defined below) which is
not an Affiliate (as defined below) of the
Corporation; or (iii) the stockholders of the
Corporation approve any compulsory share exchange
pursuant to which the Common Stock is converted into
other securities, cash or property of another Person
which is not an Affiliate of the Corporation or (iv)
the Board of Directors of the Corporation approves
any exchange or

6
<PAGE> 7
tender offer for outstanding Common Stock by any
Person which is not an Affiliate of the Corporation
if, upon consummation of such exchange or tender
offer, the offeror would become the beneficial owner
of fifty percent (50%) or more of the voting stock of
the Corporation.

(v) "Affiliate" shall mean a Person that directly, or
indirectly through one or more intermediaries,
controls, is controlled by, or is under common
control with, the Person referred to, and in this
definition, "control" means the possession, direct or
indirect, of the power to direct or cause the
direction of the management and policies of a Person,
whether through ownership of securities, by contract,
or otherwise.

(vi) "Person" shall mean a corporation, an association, a
limited liability company, a partnership, an
organization, a business, an individual, a
governmental or political subdivision thereof or a
governmental agency.

(vii) "Change in Control" shall mean (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the
Exchange Act) (other than the Corporation, any
trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any
corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the
same proportion as their ownership of stock of the
Corporation), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the
Corporation representing 40% or more of the combined
voting power of the Corporation's then outstanding
securities without the approval of the Board of
Directors of the Corporation; (ii) during any period
of two consecutive years, individuals who at the
beginning of such period constitute the Board, and
any new director whose election by the Board or
nomination for election by the Corporation's
stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for
election was previously so approved cease for any
reason to constitute at least a majority thereof, or
(iii) if Marc Shore, together with his immediate
family members and all Affiliates of Marc Shore
and/or his immediate family members, either
individually or acting as a group, cease to own at
least 15% of the outstanding Common Stock of the
Corporation.

7. EXECUTIVE COVENANTS.

(a) NOTICE OF CREATION. Executive will both during and after the
Employment Period promptly and fully disclose to the
Corporation any and all inventions, discoveries, improvements,
ideas, devices, designs, models, prototypes, processes,
compositions, know-how, information, works (including computer
programs and written and graphics materials), mask works and
data, whether of a business,

7
<PAGE> 8
technical or other nature and whether or not protectable under
U.S. or foreign patent, copyright, trade secret or other law
(collectively, "Works"), that concern or relate directly to
Competitive Activities (as defined in Section 7(d) below) and
that are first conceived, reduced to practice, fixed in a
tangible medium of expression or are otherwise made by
Executive solely or jointly with others during the Employment
Period, whether during regular business hours or otherwise
(the "Intellectual Property"). Notwithstanding the foregoing,
Executive shall have the right to maintain his ownership
interest in and serve on the board of Q2 Marketing, Inc. and,
through Q2 Marketing, Inc., continue his involvement in the
development and licensing of the "Q-Pack" patent and related
trademark, copyright and other related intellectual property
rights (subject in all respects to the provisions of the last
two sentences of Section 1(b) hereof).

(b) OWNERSHIP OF INTELLECTUAL PROPERTY. Upon its respective
conception, reduction to practice, fixation in a tangible of
expression or other making, an item of Intellectual Property
and all worldwide right, title and interest in and to that
Intellectual Property, including all common law, statutory,
treaty and convention rights, including the right to sue for
all past, present and future infringement, shall immediately
become and forever remain the property of the Corporation
without any further act or deed being required and without any
additional consideration from the Corporation to Executive,
and Executive hereby irrevocably assigns to the Corporation,
and the Corporation hereby accepts, all such Intellectual
Property and all such worldwide right, title and interest. The
Executive hereby waives and agrees not to assert any moral
rights or similar rights under the laws of any jurisdiction
with respect to any Intellectual Property. Notwithstanding the
foregoing, Executive shall have the right to maintain his
ownership interest in and serve on the board of Q2 Marketing,
Inc. and, through Q2 Marketing, Inc., continue his involvement
in the development and licensing of the "Q-Pack" patent and
related trademark, copyright and other related intellectual
property rights (subject in all respects to the provisions of
the last two sentences of Section 1(b) hereof).

(c) FURTHER ASSURANCES. Executive will from time to time, both
during and after the Term, upon the request and at the expense
of the Corporation, but without further consideration from the
Corporation, (a) make application through the attorneys for
the Corporation for Letters Patent, utility models, copyright
registrations and other forms of intellectual property
protection for and on the Intellectual Property in the United
States and in countries foreign thereto, (b) cooperate with
the attorneys in the prosecution, maintenance, reissue,
renewal, extension and defense of, and suit upon, all such
applications and resulting Letters Patent, utility models,
copyright registrations and other forms of intellectual
property protection, and (c) do and perform all acts,
including executing documents, believed by the attorneys to be
necessary or desirable in furtherance of the foregoing and for
assigning and perfecting all right, title and interest in and
to the Intellectual Property in the Corporation or its
successors or assigns, including

8
<PAGE> 9
executing applications and assignment documents. All decisions
concerning such applications and resulting Letters Patent,
utility models, copyright registrations and other forms of
intellectual property protection, including all decisions
concerning their filing, prosecution, maintenance, reissue,
renewal, extension, defense and suits upon them, shall be
solely those of the Corporation, and Executive shall have no
claim or cause of action against the Corporation arising out
of or concerning any such decisions or the results of those
decisions. Notwithstanding the foregoing, Executive shall have
the right to maintain his ownership interest in and serve on
the board of Q2 Marketing, Inc. and, through Q2 Marketing,
Inc., continue his involvement in the development and
licensing of the "Q-Pack" patent and related trademark,
copyright and other related intellectual property rights
(subject in all respects to the provisions of the last two
sentences of Section 1(b) hereof).

(d) NON-COMPETITION. In order to induce the Corporation to enter
into this Agreement, the Executive hereby expressly covenants
and agrees that he shall not, without the express written
consent of the Corporation, for his own account or jointly
with any other person, for the Term, for any reason (a)
participate in, engage in or be connected in any way with,
directly or indirectly, as a proprietor, contractor, employee,
principal, partner, officer, stockholder, member, advisor,
consultant, agent or licensor (whether paid or unpaid),
Competitive Activities (as defined below) anywhere in the
world in which the Corporation conducts business, (b) directly
or indirectly, own, manage, operate, join, control, loan money
to, invest in, or otherwise participate in, or be connected
with, or become or act as an officer, employee, consultant,
representative or agent of any Competitor (defined below), or
(c) intervene in or interfere with any relationships between
the Corporation and its vendors or customers or prospective
customers or disrupt its customer markets, anywhere in the
world in which the Corporation conducts business.
Notwithstanding the foregoing, the Executive may at any time
own, solely as a passive investor, securities of any entity,
whether or not in competition with the Corporation, if (a)
such securities are publicly traded on a nationally-recognized
stock exchange or on NASDAQ, and (b) the aggregate holdings of
such securities by the Executive and his immediate family do
not exceed one percent (1%) of the voting power or one percent
(1%) of the capital stock of such entity. As used herein,
"Competitive Activities" means the development, sale or
resale, licensing or sublicensing, distribution or
redistribution, or other commercial exploitation, of packaging
products, "Competitor" means any Person whose principal
business consists of Competitive Activities, or any
combination thereof. Notwithstanding the foregoing, nothing
contained in this Section 7(d) shall be deemed to prohibit
Executive from (i) maintaining an ownership interest in,
serving on the board of directors of or participating in the
operations of, Oliver Trucking Corporation, provided that the
business activities of Oliver Trucking Corporation are limited
solely to trucking brokerage and warehousing and other
activities not constituting Competitive Activities, or (ii)
maintaining an ownership interest in or serving on the board
of

9
<PAGE> 10
Q2 Marketing, Inc. or, through Q2 Marketing, Inc.,
participating in the development and licensing of, the
"Q-Pack" patent and related trademark, copyright and other
related intellectual property rights; provided, further, that
any such activities described in clauses (i) and (ii) above
are in strict compliance with the last two sentences of
Section 1(b) hereof, or from maintaining an ownership interest
in and conveying or leasing the property located at 620 South
Belmont Avenue, Indianapolis, Indiana.

(e) REASONABLENESS OF RESTRICTIONS. The Executive acknowledges and
agrees that the covenants contained herein with respect to
non-competition are reasonable in scope, geographic
application and duration, in view of the economic bargain
contained herein. The Executive represents and warrants to the
Corporation that, notwithstanding any termination of his
employment or consulting engagement prior to the expiration of
the Term pursuant to Section 6, his experience, background and
skills are such that he is able to obtain consulting projects
on reasonable terms and conditions without violation of the
restrictive covenant contained herein with respect to
non-competition; and that such covenant does not and will not
pose any undue hardship to the Executive.

(f) TANGIBLE THINGS. Executive covenants and agrees that (i) all
tangible things, including confidential memoranda, notes,
notebooks, drawings, lists (including, without limitation,
mailing and customer lists), records and other confidential
documents (and all copies thereof), made or compiled by
Executive during the Employment Period or made available to
Executive concerning the Corporation's business shall be the
property of the Corporation, and (ii) if such tangible things
are in the possession or control of Executive, Executive shall
deliver them to the Corporation promptly following the
Consulting Period or at any other time upon request of the
Corporation.

(g) NO IMPROPER DISCLOSURE. Executive represents and warrants that
Executive has not disclosed, and will not disclose, to the
Corporation any information, whether confidential, proprietary
or otherwise, that the Executive possesses and that Executive
is not legally free to disclose. Executive further agrees to
defend, indemnify and hold harmless the Corporation against
all claims, demands, losses, damages or expenses, including
attorneys' fees, suffered or incurred as a result of any
violation of the representations contained in this clause (g).

(h) NO EMPLOYEE SOLICITATION. The Executive hereby agrees that
during the Term, he shall not, directly or indirectly, for his
own account or jointly with another, or for or on behalf of
any entity, as principal, agent or otherwise, solicit, induce
or hire or in any manner attempt to solicit, induce or hire
any person employed by the Corporation or any of its
affiliates to leave such employment, whether or not such
employment is pursuant to a written contract with the
Corporation or otherwise; provided, however, that Executive
shall not be in breach of this provision unless the person so
solicited or induced is hired by Executive or any of

10
<PAGE> 11
his Affiliates or any entity on whose behalf Executive
solicited or induced such person within six (6) months after
the last act constituting such solicitation or inducement but
only if such solicitation or inducement did not include any
future commitment to employ the person so solicited or induced
by Executive or any individual or entity on whose behalf
Executive made such solicitation or inducement.

(i) TRADE SECRETS. Executive acknowledges that Executive's work
for the Corporation is expected to bring Executive into close
contact with various confidential technical and research data,
confidential business data and other information of the
Corporation not readily available to the public. The Executive
expressly covenants and agrees that he will not at any time,
whether during or after the Term, directly or indirectly, on
any basis for any reason, use or permit third parties within
his control, the use of any trade secrets, confidential
information or proprietary information of, or relating to, the
Corporation, or any affiliate of the Corporation (including,
without limitation, data and other information relating to any
of the Corporation's processes, apparatus, products, software,
packages, programs, trends in research, product development
techniques or plans, research and development programs and
plans or any Works and all secrets, customer lists, lists of
employees, sales representatives and their territories,
mailing lists, details of consultant contracts, pricing
policies, operational methods, marketing plans or strategies,
business acquisition plans, new personnel acquisition plans,
designs and design projects and other confidential business
affairs concerning the Corporation and the Corporation's
business), in connection with any activity or business,
whether for his own account or otherwise, and will not divulge
such trade secrets, confidential information or proprietary
information to any person, firm, corporation or other entity
whatsoever. The Executive shall not be prohibited from
divulging information deemed to be trade secret or
confidential or proprietary information of the Corporation:
(i) if and to the extent that disclosure of any such
information is pursuant to appropriate safeguards on
confidentiality and (x) necessary and appropriate in
connection with the submission of bids by the Corporation in
the ordinary course of business or (y) required pursuant to
the Corporation's marketing efforts directed to specific
clients or bona fide prospective clients or the provision of
services to existing clients in the ordinary course of
business or (z) is made to other employees of the Corporation
or independent contractors thereof in the ordinary course of
the Corporation's business, (ii) if the specific item of
information becomes generally available to the public without
violation of this Agreement or any other confidentiality
agreement among the Executive and the Corporation or any other
confidentiality agreement to which the Executive is a party,
or (iii) if such disclosure is compelled by law, in which
event the Executive agrees to give the Corporation prior
written notice of any disclosure to be made pursuant to this
Subsection (iii), and the Executive, at the Corporation's
expense, shall cooperate fully with the Corporation to obtain
protective orders, confidential treatment or other such
protective action as may be available to preserve the
confidentiality of the information required to be disclosed.

11
<PAGE> 12
(j) REMEDIES. It is expressly understood and agreed that the
services to be rendered hereunder by the Executive are
special, unique and of extraordinary character, and in the
event of the breach by the Executive of any of the terms and
conditions of this Agreement on his part to be performed
hereunder, or in the event of the breach or threatened breach
by the Executive of the terms and provisions of this Section 7
of this Agreement, then the Corporation shall be entitled, if
it so elects, to institute and prosecute any proceedings in
any court of competent jurisdiction, either in law or equity,
for such relief as it deems appropriate, including without
limiting the generality of the foregoing, any proceedings to
obtain damages for any breach of this Agreement or to enforce
the specific performance thereof by the Executive or to enjoin
the Executive from performing services which are prohibited by
this Agreement for any other person, firm or corporation. If
the Executive violates any provision of this Section 7, the
time period set forth herein with respect to such provision,
if any, shall be extended, until one year after the date of
entry of final judgment enforcing such provision and the time
for appeal has lapsed. If Executive is held by a court of
competent jurisdiction to have breached this Agreement,
Executive shall be liable for any actual and reasonable
attorneys' fees and costs incurred by the Corporation in
enforcing its rights hereunder.

(k) ENFORCEMENT. It is hereby expressly agreed by the Corporation
and the Executive that if any portion of the restrictive
covenants and provisions set forth in this Section 7 is held
to be unreasonable, arbitrary, against public policy or
otherwise unenforceable for any reason, then each such
covenant or provision shall be considered divisible as to
scope, time and geographical area, with each month of a
specified period being deemed a separate period of time and
each county within any geographical area being deemed a
separate geographic area. The parties hereto expressly agree
that notwithstanding their mutual expectation that the
covenants and restrictions contained herein will be
enforceable and enforced, a lesser scope, period of time or
geographic area shall be enforced to the extent that the
covenants contained herein may be unenforceable as written.
The Corporation and the Executive also agree that in the event
that any court of competent jurisdiction determines a portion
of the restrictive covenants contained herein to be
non-enforceable, such determination by such court shall be
deemed to have applicability only within the jurisdiction in
which such court is located and shall not be deemed to be
effective in any other jurisdiction. The existence of any
claim or cause of action by the Executive against the
Corporation, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement
by the Corporation of the restrictive covenants contained in
this Section 7.

(l) COVENANTS NON-EXCLUSIVE. The Executive acknowledges and agrees
that the covenants contained in this Section 7 shall not be
deemed exclusive of any common law rights of the Corporation
in connection with the relationships contemplated hereby; and
that the Corporation shall have any and all rights as

12
<PAGE> 13
may be provided by law in connection with the relationships
contemplated hereby. The provisions of this Section 7 shall
survive any expiration of the Term or Executive's employment
or consulting engagement hereunder in accordance with their
respective terms.

8. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement in any circumstance shall not affect the validity or
enforceability of such provision in any other circumstance or the
validity or enforceability of any other provision of this Agreement,
and except to the extent such provision is invalid or unenforceable,
this Agreement shall remain in full force and effect. Any provision in
this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of
such prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof in such jurisdiction, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.

9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered
mail, to his then residence in the case of the Executive (with a copy
to Rubin Baum Levin Constant & Friedman, 30 Rockefeller Plaza, New
York, New York 10112, Attention: Paul A. Gajer) or to its principal
office in the case of the Corporation, and shall be deemed given when
deposited in the United States mails, postage prepaid.

10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties and supersedes all prior agreements between the parties with
respect to the subject matter hereof. It may not be changed orally but
only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge
is sought.

11. WAIVER. The waiver by the Corporation of a breach of any provision of
this Agreement by the Executive shall not operate or be construed as a
waiver of any subsequent breach by the Executive. The waiver by the
Executive of a breach of any provisions of this Agreement by the
Corporation shall not operate or be construed as a waiver of any
subsequent breach by the Corporation

12. GOVERNING LAW. This Agreement shall be subject to, and governed by, the
laws of the State of New York.

13. CONSENT TO JURISDICTION. The parties hereby each agree that the
non-exclusive forum for resolving any litigation, action or claim by
any party against any other shall be a state or federal court located
in the County of New York, New York, United States, or any federal
court located within the Eastern District of New York or the Southern
District of New York (any of such, a "Designated U.S. Court"). In
addition, the parties each hereby consent to personal jurisdiction and
venue of any Designated U.S. Court with respect to any action brought
by the other party as provided herein.

13
<PAGE> 14
14. SUCCESSORS. The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and shall be binding upon any
successor of the Corporation or to the business of the Corporation.
Neither this Agreement nor any rights or obligations of the Executive
hereunder shall be transferable or assignable by the Executive;
provided, however, that this Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts would still be payable to the Executive hereunder if he had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designee or, if there be no such
designee, to the Executive's estate.

15. WAIVER OF RIGHT TO TRIAL BY JURY. EXECUTIVE HEREBY AGREES NOT TO ELECT
A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT OR ANY CLAIM,
COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION HEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
EXECUTIVE, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND
EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE. THE CORPORATION IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
EXECUTIVE.

IN WITNESS WHEREOF, the parties hereto have duly signed this
Agreement in duplicate original as of the 30th of October 1998, effective as of
October 30, 1998.

SHOREWOOD PACKAGING CORPORATION

By:
-----------------------------
Name:
Title:

--------------------------------
Leonard Verebay

<PAGE> 1
Exhibit 13

EMPLOYMENT AGREEMENT

ERIC KALTMAN

WITH

SHOREWOOD PACKAGING CORPORATION

AGREEMENT made effective as of October 30, 1998, between
Shorewood Packaging Corporation, a Delaware corporation having its principal
executive offices at 277 Park Avenue, New York, N.Y., 10172-0124 (herein called
the "Corporation"), and Eric Kaltman currently residing at 8 Coachmans Court,
Old Westbury, NY 11568 (herein called the "Executive").

W I T N E S S E T H

The Corporation has acquired the assets of Queens Group, Inc.,
the former employer of the Executive.

The Corporation recognizes that the Executive possesses
extensive knowledge and skill in the business of his former employer and
recognizes that this expertise is essential to an orderly transaction.

This Agreement is intended to provide the Corporation with the
exclusive benefit of the Executive's skill and experience for the term hereof.

Accordingly, the parties desire to and do hereby enter into
this Agreement as of the date first set forth above.

NOW, THEREFORE,

1. EMPLOYMENT

(b) EMPLOYMENT DUTIES. Except as hereinafter provided, the
Executive shall during the Employment Period perform the
executive and administrative duties and functions and shall
have the powers and privileges of an Executive Vice President
of the Corporation, as such duties, functions, powers and
privileges are defined in the By-Laws of the Corporation in
effect on the date hereof and as currently
<PAGE> 2
interpreted, and, to the extent not defined therein, as the
same are customarily performed and exercised by an Executive
Vice President of a publicly owned corporation incorporated in
one of the states of the United States of America. If so
elected, the Executive shall, during the Employment Period,
serve as a member of the Board of Directors (and of the
Executive Committee or any similar committee having powers of
the Board of Directors now in existence or hereafter created)
of the Corporation without any additional compensation for
such services for so long as the Executive is elected to serve
on the Board, the Executive Committee or any similar
committee. As used in this Agreement, the term "Corporation"
includes each Subsidiary of the Corporation. So long as he is
an officer of the Corporation, the Executive agrees to devote
substantially all his business time to the business and
affairs of the Corporation, and to exert his best efforts in
the performance of his duties as an officer, director and
member of any committee of the Board of Directors of the
Corporation to which he may be elected, so as to promote the
profit, benefit and advantage of the business to the
Corporation. Notwithstanding the foregoing, the Corporation
acknowledges that Executive is a stockholder, and serves on
the board of directors, of each of Oliver Trucking Corporation
and Q2 Marketing, Inc. (the "Other Interests") and agrees that
Executive may devote that portion of his business time not
required to be devoted to the business and affairs of the
Corporation as provided above to such Other Interests,
provided that (i) neither such activities nor the time devoted
thereto by Executive interfere with the duties to be performed
by Executive hereunder and (ii) in no event shall Executive
assume an active role in the day-to-day management of Oliver
Trucking Corporation or Q2 Marketing, Inc. As used in this
Agreement, the term "Q2 Marketing, Inc." shall mean Q2
Marketing, Inc. and its successors and assigns.

2. CONSULTING SERVICES.

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<PAGE> 4
this Agreement, be considered an employee of the Corporation
and shall not, solely as a result of this Agreement, be
entitled to participate in any plans, arrangements, or
distributions by the Corporation pertaining to or in connection
with any pension, stock, bonus, profit-sharing or similar
benefits for its regular employees and shall have no right or
authority, without the express written consent of the
Corporation, to bind or act on behalf of the Corporation with
respect to any matter whatsoever. The Executive shall be
responsible for all taxes related to his service as a
consultant hereunder.

6. EARLY TERMINATION.

(a) TERM. This Agreement shall commence on the date first written
above and shall continue until the eight year anniversary of
such date (the "Term").

(ii) "Disability" shall mean that, as a result of the
Executive's incapacity due to physical or mental
illness, the Executive is unable to substantially

7. EXECUTIVE COVENANTS.

12. GOVERNING LAW. This Agreement shall be subject to, and governed by, the
laws of the State of New York.

IN WITNESS WHEREOF, the parties hereto have duly signed this
Agreement in duplicate original as of the 30th of October 1998, effective as of
October 30, 1998.

SHOREWOOD PACKAGING CORPORATION

By: _____________________________
Name:
Title:

--------------------------------
Eric Kaltman

<PAGE> 1
Exhibit 14

AGREEMENT
---------

AGREEMENT ("Agreement") dated effective January 1, 1996 by and between
SHOREWOOD PACKAGING CORPORATION, a DELAWARE corporation ("Shorewood") and KAMSKY
ASSOCIATES, INC., a NEW YORK corporation, ("KAI").

It is hereby agreed as follows:

1. OBJECTIVE

(a) It is Shorewood Packaging Corporation's ("Shorewood")
objective to command a substantial share of the Chinese
printing and packaging industry by building and operating one
or more plants in the Peoples' Republic of China ("China") to
support key international companies currently operating in
China as well as developing high quality domestic consumer
product industry.

(b) Kamsky Associates, Inc. ("KAI") is well positioned to
assist Shorewood in formulating the appropriate market
strategy with which to reach this objective.

2. MARKET ENTRY STRATEGY

(a) KAI shall focus on identifying and qualifying one or
more projects, either majority owned joint ventures or wholly
foreign owned ("Project[s]") in strategic locations in China.
The decision to proceed with a joint venture and the terms of
any joint venture shall be determined solely by Shorewood and
its joint venture partner.

(b) The time frame for the implementation for this
strategy would be set in consultation with Shorewood. However,
given that Shorewood's objective is to command a majority
market share, KAI believes that current growth in the printing
and packaging industry would warrant that this time frame be
minimized.

(c) At present, a number of key international players are
extending their activities in China to service the growing
number of companies, particularly foreign-invested
enterprises, in China which require high quality packaging. To
serve as an example, one major Australian printing packaging
firm entered the Chinese market to support important customers
such as Mars Inc. and Walls Ice-cream, which have already set
up manufacturing facilities in Beijing. The company has
recently finished construction of a wholly owned factory in
southern Beijing, which is additional to operating joint
ventures in Qingdao and Beijing. As a further response to
customer demand, it is understood that this company has
already taken concrete steps to expand its presence to the
Shanghai region.
<PAGE> 2
(d) Another strategic consideration is the recent change
in tax laws in China, which will affect to a certain degree
the environment in which future foreign investors must
operate. As part of China's compliance with national treatment
requirements for entry to GATT and the World Trade
Organization, China's executive Vice Premier in charge of the
Economy, Mr. Zhu Rongji, has recently announced that China
will phase out tax exemptions for capital equipment imports by
foreign-invested enterprises from January 1, 1996. This new
policy will increase the market entry price for foreign firms
considerably, especially those in technology and
equipment-intensive industries. However, companies which have
registered their projects with government authorities by this
date will not be affected.

(e) KAI, with its considerable experience in China, will
use its best efforts on Shorewood's behalf to find a creative
mechanism to try to avoid or lessen the impact of the new
policy on the company's planned investments.

(f) On the basis of current knowledge, KAI would recommend
Shorewood to consider five cities as possible locations for
the Project(s). KAI would classify these cities as "priority"
and "secondary" targets.

(g) The three "priority" cities of Tianjin, Shanghai, and
Guangzhou provide Shorewood with strategic China-wide
coverage. The "secondary" cities of Chengdu and Dalian have
the advantage of allowing Shorewood to support specialist
markets in those regions. KAI has extensive experience in
working in each of these cities

(h) Tianjin. Tianjin, a two hour drive to the east of
Beijing, is a major port city which has attracted substantial
foreign investment over the last few years, including major
existing and potential Shorewood customers such as Motorola,
Eastman Kodak, Heinz, Seagram and Samsung. Tianjin and its
locality provide a strong customer base for a potential
Shorewood venture. An excellent potential site for a Project
is the Tianjin Economic-Technological Development Area (TEDA),
the management of which KAI has had extensive dealings. A
number of foreign companies have successfully established
wholly foreign owned ventures in TEDA, and several Chinese
printing and packaging companies, which may prove to be
desirable joint venture partners, are also established in the
Area. TEDA provides investors with preferential tax treatment.

Tianjin is linked with China's Northeast by the
Beijing-Shenyang Railway line, allowing access as far north as
Jilin and Heilortgjiang Provinces. There are rail, road and
air links with Beijing and the surrounding areas of Shandong,
Hebei and Shanxi. As such, a Tianjin based venture would not
only be close to major potential and current customers, but
also can conveniently service the northern and north east
China markets.

(i) Shanghai. Shanghai is one of China's economically most
dynamic cities. Many world renowned multinationals have been
attracted to the city, including

2
<PAGE> 3
existing and potential Shorewood customers as Gillette, 3M,
Xerox, Johnson & Johnson and Lux. In addition, Shanghai has an
extremely well developed light and chemical industry sector,
with companies such as BASF, Du Pont, Ciba Geigy and SICPA
well represented. The city provides for strong support form
raw material and printing suppliers. KAI would consider the
Taopu Chemical Industry Area or the Pudong Development zone as
two of a number of potential sites for a Shanghai venture.

Shanghai is connected to an east-west railway line
reaching as far as Xi'an and ultimately Urumugi in Xinjiang
Province. Shanghai is also China's major port connecting the
city with international and domestic shipping lines.
Furthermore, inland China can be accessed via the Yangtze
River.

The city also has an excellent airport facility. A
second airport is planned for Shanghai to cover strong demand
for cargo transport. As such this city is an excellent
location from which to service China's eastern seaboard and
the Provinces of Shaanxi, Hubei, Sichuan, Jiangxi and Anhui.

(j) Guangzhou. Guangzhou is situated in the center of the
Pearl River Delta, the fastest growing region in China. This
area attracts one third of all foreign investment into China,
sourced from Hong Kong, the overseas Chinese communities of
Sough East Asia as well as the West. The region is a center
for the computer and compact Disk manufacturing industries, as
well as consumer electricals.

In addition to heavy investment in the food and
beverage industries, pharmaceuticals, cosmetics, electric and
other consumer items, the Province is supplying the needs of
the tobacco industry. Indeed, a new cigarette filter
manufacturing joint venture is currently being established in
the neighboring city of Zhuhai.

Guangzhou is linked to Hong Kong by rail, road and
air. The cities of Guizhou and Kunming, centers of the major
tobacco manufacturing regions of Guangxi and Yunnan, are all
accessible by rail and air from Guangzhou. Excellent road
links also exist between Guangzhou and Fujian Province.

(k) Chengdu. Chengdu is the capitol city of Sichuan
Province and is the hub of the tobacco industry in China. A
venture established in this town would strategically position
Shorewood vis-a-vis this industry which is, although
nationwide, concentrated in Sichuan, Yunnan and Guizhou.

There are a number of additional advantages to
investing in this inland Provincial capitol. There are strong
discrepancies in economic growth and living standards between
the coastal and inland regions, due to a skewed investment
pattern favoring coastal areas. It is a policy priority for
the Central Government to develop

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inland China, and therefore investments in this region are
encouraged at the central level.

As such, the environment in areas such as Chengdu can
be more flexible. A case in hand was recounted to Virginia
Kamsky by the Governor of Sichuan, Mr. Xiao Yang. Glaxo, the
English pharmaceutical company, had been discussing a joint
venture in Shanghai. After three years, with no results, the
company turned to Chengdu as a location for their investment,
and a joint venture was signed within three months.

(l) Dalian. Dalian, a coastal city in Liaoning Province,
is a focus for Japanese and Korean investment in China. The
area has a strong pharmaceutical base, with companies such as
Japan Medical Supplies and Pfizer investing in the area.
Furthermore, Dalian is a base for third country export for
Japanese as well as South Korean companies. The superior
quality of consumer items manufactured in this city, many
destined for the Japanese and third country markets, has
created a strong demand for high quality packaging products.
Dalian, a major port city, is linked to Chin's eastern
seaboard by boat, and to the northeast and northern China by
train.

(m) It is notable that the coastal province of Shandong
plays a similar role, particularly for Korean investors, as
Dalian. A high level South Korean official related to KAI that
over 10,000 South Korean consumer goods manufacturers have
relocated to Shandong to take advantage of the opportunities,
not only to access the Chinese domestic market, but also for
third country trade.

3. MARKET ANALYSIS

(a) KAI will carry out a national survey consistent with
KAI's past practices, focusing upon the areas listed above to
help identity potential Shorewood customers, both domestic and
international, in the high end consumer goods industry. KAI's
market analysis will also cover the activities of key local
and international competitors. KAI will source this
information from available reference materials as well as from
personal interviews with KAI's current and extensive industry
and government contacts.

(b) In all of the foregoing locations, KAI shall identify
the operations which are engaged in printing and packaging
manufacturing for consumer products including, where
available, information as to size, revenues, description of
packaging and printing technology, samples of products, prices
of products and principal customers. KAI will assess these and
other entitles for their desirability as a joint venture
partner and provide this and other necessary information to
assist Shorewood in making the decision of to the structure of
each investment, whether that be majority share joint venture
or a 100% foreign owned.

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(c) KAI shall promptly prepare and present a proposed
schedule for the upcoming visit of Shorewood executives in
China. KAI would suggest that the trip encompass the three
priority cities, i.e. Guangzhou, Shanghai and Tianjin. An
alternative agenda might extend this schedule to include
Dalian and Chengdu. During each of these stopovers, KAI will
introduce Shorewood executives to key government officials in
charge of both foreign investment and the printing and
packaging industry, and potential joint venture partners or
sponsors for Project(s).

(d) KAI will make all necessary arrangements to ensure the
effectiveness of this trip. This will include full logistic
and on ground support, including, where possible and if
necessitated by severe traffic congestion, police escort.

4. Commitment of Personnel

(a) KAI will appoint a core team to work on Shorewood
Project(s).

(b) However, given the urgency of the task at hand, KAI
will set up several teams in the first instance to work in
concert on the geographical areas listed above, i.e. Shanghai,
Tianjin, Guangzhou, Chengdu and Dalian. The teams will be
supervised by the Managing Director of KAI Beijing. The
Managing Director will be responsible for consolidating
information gathered so as to provide a comprehensive briefing
on the basis of with Shorewood can make an informed decision.

(c) As Shorewood moves forward, the core team will
continue to provide full and appropriate support. KAI will add
to the team as KAI deems reasonably necessary. Furthermore, if
necessary and subject to Shorewood's approval, KAI will assist
Shorewood in identifying and recruiting experts and
specialized support to assist Shorewood with the
implementation of the investment strategy.

(d) All KAI executive staff in Beijing are bilingual in
Chinese and English.

5. Project Registration and Contract Negotiation

(a) Once Shorewood has identified a Project or more than
one Project(s), KAI shall work closely with Shorewood to
provide the data required to make a decision. Upon making a
decision to proceed on a particular Project(s), KAI shall
coordinate with the Chinese joint venture partner or sponsor
regarding project registration and shall provide full
assistance on Shorewood's behalf, as required.

(b) KAI shall further assist with the preparation of a
letter of intent, memorandum of understanding, a
pre-feasibility study, if necessary, a formal contract, a
feasibility study, and numerous other documents required for
approval by the Foreign Investment Control Commission. A
feasibility study, together with a binding contract and
articles of association must be submitted to this body for
approval ("Approval of the Project"). In addition, KAI will
assist with any licensing

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<PAGE> 6
permits, application for abatement or reduction of taxes and
exemptions, or reduction of duties on imported equipment and
raw materials, etc.

(c) KAI shall assist Shorewood throughout the approval
process for the Project(s). KAI shall provide comprehensive
logistical support throughout this period for Shorewood
personnel, including assistance in the negotiation,
preparation and execution of various documents. KAI's
facilities in Beijing will be available to Shorewood's
representatives.

6. Ongoing Support

(a) Upon commencement of the operation of Shorewood's
Project(s), KAI shall continue to assist with the expansion of
operations.

(b) KAI will further provide assistance with any
operational issues that arise, including the identification of
sources of raw materials, labor and equipment. With over 15
years experience in the China market, KAI is well positioned
to assist with the establishment of accounting, billing and
collection procedures, and will provide such assistance.

(c) KAI will utilize its comprehensive network in order to
assist Shorewood with the identification of suitable
management personnel.

7. Compensation

(a) KAI's compensation for the foregoing services shall be
at the rate of Twenty-five Thousand ($25,000.00) Dollars per
month, payable in advance, with the initial payment due as of
January 1, 1996 and thereafter equal successive payments on
each and every successive monthly anniversary date. Shorewood
has paid, and KAI acknowledges receipt of, $75,000
representing monthly payments due hereunder through March 1,
1996. Compensation shall be prorated for partial months. KAI
shall also be entitled to reimbursement of all reasonable out
of pocket expenses (exclusive of KAI's administration and
overhead, salaries, and similar expenses) incurred by KAI in
carrying out the terms of this Agreement including first class
air travel for KAI's managing director allocable to
Shorewood's business.

(b) Prior to but not later than the "Approval of the
Project(s)", whether by way of a joint venture, or a
wholly-owned operation, or otherwise, Shorewood shall issue or
cause to be issued to KAI a profit participation in the
Project(s) ("Interest") at the percentage levels set forth on
EXHIBIT A.

(c) If in Shorewood's good faith judgment, it is not
feasible for Shorewood to grant the Interest at that time,
Shorewood shall grant it at such a time that it is practicable
but in no event later than the earlier of (i) a date not less
than thirty (30) days prior to the sale of any interest in the
Project(s) or (ii) the date that any Project

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<PAGE> 7
commences commercial operations. In connection with the
issuance of the Interest, Shorewood and KAI or their
Affiliates shall execute such documents and agreements
necessary to evidence the issuance of the Interest and to
assure compliance with state and federal securities laws
and/or exemptions therefrom. By way of example, Shorewood and
KAI may enter into a profit participation agreement containing
terms not inconsistent with the terms of this Agreement. At
Shorewood's election, the Interest may be in the form of
non-voting, second class stock, common stock, with or without
voting rights, or a participation in Net Profits (as herein
defined) and a share in Shorewood's Profit Upon Sale Or
Liquidation of its interest in the Project(s), or any other
structure determined by Shorewood provided that the net effect
to KAI is to irrevocably provide KAI with the percentage
interest in Net Profits and Profit Upon Sale Or Liquidation,
at the levels described above.

(d) For purposes of calculating KAI's share of Net
Profits, Net Profit shall mean "Gross Sales" (as herein
defined) from all Project(s) less all direct "Costs" incurred
in generating those sales (which costs shall exclude any
depreciation on Shorewood's "Invested Capital" or "Capital
Costs", as defined below) including, without limitation, the
cost of labor and material used in the manufacture of
Shorewood's product; marketing, sales and promotional expenses
and a reasonably proportionate share of Shorewood's interest
expense, depreciation on fixed assets acquired with Net
Profits, income taxes incurred in connection with Project(s),
overhead and administrative expenses for each fiscal year. All
of the foregoing shall be allocated and assigned by Shorewood
in accordance with its normal and customary administrative and
accounting practices as the same shall be applied and
implemented from time to time, which practices shall e in
accordance with U S. generally accepted accounting principles.
If in any fiscal year there is a loss (Costs in excess of
Gross Sales), losses shall be accrued and netted against
future Net Profits on a dollar for dollar basis until fully
absorbed in subsequent years. If at the time of sale or
liquidation of KAI's Interest such losses have not been fully
absorbed, such losses shall be deducted from any distribution
to KAI of Profit Upon Sale or Liquidation, or if Shorewood is
acquiring KAI's interest the accumulated loss, if any, may be
deducted from the purchase price; provided, however, that such
losses shall not be deducted from any distribution to KAI if
Shorewood is matching an offer to KAI, pursuant to Section 1
of Exhibit A hereto. KAI shall have no personal liability for
any Costs, accumulated losses or liabilities incurred by
Shorewood in connection with the operation of the Project(s),
whether or not any losses are fully absorbed by Net Profits.
For purposes hereof, "Gross Sales" shall mean all revenues
from the sale of product from all Project(s), less all
returns, costs of collection, rebates or other credits or
consideration given by Shorewood to its customers in the
ordinary course of business. For purposes hereof, "Invested
Capital" means Shorewood's aggregate cash investment in
Project(s) from time to time, whether such investment takes
the form of cash contributions or loans from Shorewood or its
Affiliates.

Notwithstanding anything to the contrary in this
Agreement, in making any calculations of costs pursuant to
this paragraph, any inter-corporate or other charges

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<PAGE> 8
or transactions among Shorewood and its Affiliates (such as
transfer pricing among subsidiaries or inter-corporate loans)
shall be determined by Shorewood in the first instance as if
the entities involved were dealing on the open market on an
arm's length basis.

For the purpose of calculation of KAI's share of
Profit Upon Sale or Liquidation, Profit Upon Sale or
Liquidation (i) shall mean Shorewood's profit then it sells,
disposes of, liquidates, transfers, assigns or otherwise
disposes of any portion of its interest in any Project
(whether such interest is in the form of stock, partnership
interest or otherwise) and (ii) shall mean the cumulative net
proceeds realized by Shorewood from such sale(s),
liquidation(s) or other disposition(s), after retirement of
applicable debt and expenses related to the transaction or
transactions, together with interest on any notes received by
Shorewood upon the sale of the Project(s), less all of
Shorewood's direct start-up costs and capital expenditures
made in connection with all Project(s), including without
limitation, the cost of land, buildings, construction costs,
construction labor, construction interest, manufacturing,
office or other equipment, permits, licenses or approvals,
architects, contributions of working capital, engineers,
attorneys and other professionals and consultants, including
fees and expenses paid to KAI pursuant to Paragraph 7 (a)
above (all of the foregoing defined as "Capital Costs"). Net
Profits reinvested in the Project(s), if any, are specifically
excluded from Capital Costs. In the event Shorewood sells less
than its entire interest in the Project(s) in an offering of
securities, whether public or private, and Shorewood retains
an interest in the Project(s), the amount received by KAI in
connection with such sale shall only be charged with that
portion of Shorewood's cost recovery, bearing the same
percentage as the interest sold by Shorewood bears to the
entirety of enterprise.

It is the intent of the parties that "Costs" and
"Capital Costs" shall not include or double-count the same
items.

In the event Shorewood obtains financing on any
Project(s) and distributes all or any part of the net proceeds
of such financing as a dividend or otherwise, KAI shall
receive a distribution in an amount calculated by multiplying
KAI's percentage Interest by the total amount to be
distributed to Shorewood as a dividend.

The entity which owns the Project(s) shall use such
fiscal year as Shorewood shall determine in its sole
discretion. Distributions of Net Profits, if any, shall be
made at such times, if at all, that Shorewood shall determine
in its sole discretion.

(e) The transfer of the Interest shall be subject to the
provisions set forth on Exhibit A attached hereto and
applicable state and federal securities laws. Notwithstanding
the Approval of the Project(s) or the issuance of the
Interest, Shorewood may postpone, delay, terminate or abandon
the Project(s) at any time in its sole and absolute discretion
subject however to Shorewood's obligation, if any,

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<PAGE> 9
to pay KAI any compensation earned through the date of
termination and the compensation described in the next
paragraph below.

(f) In the event of the termination of this Agreement by
Shorewood without good cause or by KAI for good cause, those
compensation provisions relating to the granting to KAI of the
Interest shall continue and be earned to the extent that
Shorewood enters into Project(s) in China within 30 months
from the date of this Agreement or twelve (12) months from the
termination of this Agreement, if the Agreement is extended
pursuant to Paragraph 8(a), whichever is later.
Notwithstanding the preceding sentence, in the event of the
termination of this Agreement by Shorewood, with or without
good cause, within three (3) months of the date hereof, those
compensation provisions relating to the granting to KAI of the
Interest shall continue and be earned to the extent that
Shorewood enters into Project(s) in China within 30 months
from the date of this Agreement, provided KAI has specifically
identified and/or contributed material services and/or such
services materially contributed or lead to the consummation by
Shorewood of the joint venture, wholly-owned operation or
other arrangements respecting the Project(s). For purposes of
this Agreement, Shorewood will be deemed to have entered into
a Project(s) at such time that any Project is constructed,
permitted, staffed, equipped and stocked such that there are
no conditions or impediments to the commencement of commercial
operations beyond Shorewood's reasonable control. Without
limiting Shorewood's remedies following a breach of contract
by KAI, any Interest previously earned by KAI, or to which KAI
is entitled hereunder, shall not be forfeited solely because
of the termination of this Agreement by Shorewood for cause.

8. Term

(a) The term of this Agreement shall be eighteen (18)
months from the date hereof, provided however Shorewood shall
have the right to extend this Agreement for three, six-month
increments upon written notice given not less then thirty days
prior to the expiration of this Agreement as the same may be
extended from time to time.

(b) Notwithstanding the foregoing, KAI may terminate this
Agreement without cause upon ninety (90) days written notice
to Shorewood and Shorewood may terminate this Agreement
without cause upon thirty (30) days written notice to KAI.

(c) This Agreement can be terminated by Shorewood or KAI,
without penalty, for good cause, at any time during the Term
upon fifteen (15) days' prior written notice from one party to
the other setting forth the reason for termination for cause;
provided however, that in the case KAI or Shorewood as the
case may be, shall have fifteen (15) days from receipt of such
written notice to cure the cause set forth in such written
notice as being the reason for such termination. In the event
that such cause cannot be cured within such fifteen (15) days,
the cause shall be deemed cured if the defaulting party
immediately commences the cure upon receipt of the written
notice

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and diligently prosecutes such cure to completion. For
purposes hereof, "good cause" shall mean a material breach of
this Agreement, including but not limited to poor performance
of KAI or failure by Shorewood to pay amounts due hereunder.
However, it is understood by Shorewood that China is a
developing nation, subject to certain inherent political and
economic instability. Accordingly, nothing stated or implied
herein shall be construed as a guaranty or assurance by KAI
that any particular Shorewood goals or objectives can or will
be met, and KAI shall be entitled to all compensation
otherwise payable hereunder, even if Shorewood does not meet
its goals or objectives, or political or other prevailing
conditions render such goals impossible or not feasible, as
long as KAI is using its reasonable best efforts on
Shorewood's behalf and otherwise performs its obligations
contained in this Agreement. Performance is to be judged by
reference to facts and circumstances existing at the time. Any
dispute as to whether good cause exists to terminate this
Agreement or whether such default has been cured, shall be
determined by arbitration consistent with the arbitration
provisions of this Agreement.

(d) Upon expiration of the term or earlier termination as
provided in this Paragraph, KAI shall deliver to Shorewood all
reports, studies, approvals and other documents related to the
Project(s) in KAI's possession. KAI may retain copies of all
such items for its records.

9. Director Designation

During the period in which KAI owns an Interest in
the Project(s), Shorewood, at KAI's request, shall elect
Virginia A. Kamsky or her designee as a member of the board of
directors of the Project(s) (or similar governing body),
provided there is a board of directors (or similar governing
body) of the entity which owns the Project(s). Any designee of
Virginia A. Kamsky must be acceptable to Shorewood and nothing
herein shall limit Shorewood's right to determine the number
of board members.

10. Miscellaneous

(a) KAI's services rendered in fulfillment of the terms
and obligations of this Agreement shall be as an independent
contractor and not as agent, employee, partner, or joint
venturer. KAI shall not represent itself to third persons to
be other than Shorewood' s independent contractor, nor shall
KAI offer or agree to incur or assume any obligations or
commitments for or in the name of Shorewood.

(b) KAI shall maintain the confidentiality of all
proprietary information obtained from Shorewood or obtained in
the course of providing services to Shorewood, connected with
and arising out of or pertaining to Shorewood's business
except that information which has been actually disclosed to
the public by Shorewood in the ordinary course of its business
such as its annual reports or quarterly filings with the SEC
or such information that is disclosed through no fault of KAI,
is disclosed by

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<PAGE> 11
a person whom KAI does not know to be subject to any
confidentiality agreement, or is disclosed pursuant to any
statute, law, rule, regulation, judgment, order, decree, edict
or the like.

(c) During the term of this Agreement (as such term may be
shortened or extended pursuant to the terms of this Agreement)
and (if KAI has been issued an Interest hereunder during such
term) for a period of two (2) years after KAI disposes of the
Interest, KAI and its sole shareholder, Virginia Kamsky, shall
not represent or perform any services for any company or
person whose services or products manufactured and/or sold are
competitive with Shorewood's business of manufacturing folding
cartons, consumer packaging and printed materials; provided,
however, that (i) KAI's current or future services in
providing general economic and China-related advice to
Westvaco shall not be considered a breach of this provision,
provided such services rendered to Westvaco do not expand to
assisting or advising Westvaco in areas that could reasonably
be deemed to be competitive with Shorewood's business
described above and (ii) the non-competition provisions of
this paragraph shall in no event apply if this Agreement has
been terminated without cause by Shorewood or Shorewood has
breached the terms of this Agreement. If Shorewood has not
issued an Interest to KAI hereunder during the term of this
Agreement (as such term may be shortened or extended pursuant
to the terms of this Agreement), the foregoing non-competition
provision shall apply only for a period of one year following
the end of such term; provided, however, that if Shorewood
issues an Interest to KAI in a bona fide Project during such
one-year period, then the foregoing non-competition provision
shall be effective for a period of two years after KAI
disposes of such Interest.

(d) In the performance of the services contemplated by
this Agreement, KAI and Shorewood, their principals and
employees shall comply with all applicable federal, state and
local laws and regulations, including without limitation, the
Foreign Corrupt Practices Act, the provisions of which will be
incorporated herein by reference as if fully set forth herein.
KAI and Shorewood and their respective employees shall also
comply with all applicable laws and regulations of China and
other government authorities therein.

(e) In the event of a dispute or controversy under this
Agreement the parties shall promptly submit the dispute or
controversy to arbitration, to be conducted in accordance with
the commercial rules and regulations of the American
Arbitration Association. Any such arbitration shall be
conducted in the City and County of New York before a single
arbitrator selected in accordance with the commercial rules
and regulations of the American Arbitration Association. The
determination by the arbitrator shall be final and binding and
may be entered as a final judgment by the parties with any
judge having the jurisdiction thereof. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and performed
entirely therein. The arbitrator shall have the power to award
the prevailing party its reasonable costs incurred in

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connection with the arbitration (including, without
limitation, the cost of experts and the arbitrator) and
attorney fees.

(f) Any notice, report or writing required or permitted to
be given hereunder shall be in writing and shall be served by
delivering the same personally either to the other party, or
to the agents, officers or other representatives thereof
hereinbelow designated, if any, or by depositing the notice,
contained in a sealed envelope, postage prepaid, in the United
States Postal System as registered or certified mail, with
return receipt requested or by reputable overnight courier
such as Federal Express or by electronic facsimile
transmission ("Fax"). Any and all such notices shall be
delivered to the parties at their respective addresses or Fax
numbers specified as follows:

If to Shorewood:

Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172-0124
Attention: President
Fax Number: (212) 223-3815

If to KAI:

Kamsky Associates, Inc.
2 Park Avenue
Manhasset, New York 11030-2442
Attention: Managing Director
Fax Number: (212) 319-0200

Any such notice deposited in the mail shall be
conclusively deemed delivered to and received by the addressee
seventy-two (72) hours after the deposit in the mail or one
business day after delivery to the overnight courier or one
business day after the Fax transmission, if all of the
foregoing conditions of notice shall have been satisfied and
if such notice shall at the time of mailing or delivery have
been contained in an envelope or wrapper addressed to the
party at the address above, or in the case of a Fax, shall be
preceded by a Fax cover sheet correctly setting forth the name
and Fax number of the intended recipient. Any party hereto may
change its address or Fax Number for the purposes of this
paragraph by giving such other party notice, as provided for
herein, of the new address or Fax Number.

(g) This Agreement is for the sole benefit of and shall be
binding upon the parties hereto, their respective heirs,
successors and assigns, and no other person or entity shall be
entitled to rely upon or receive any benefit from this
Agreement or any term hereof.

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(h) This Agreement and the exhibits attached hereto which
are hereby made a part hereof embody the entire Agreement of
the parties regarding the subject matter hereof. All prior
negotiations and representations are merged herein. This
Agreement may not be altered or modified, except by an
instrument in writing signed by both parties (which may be in
counterpart); nor may any provision be waived by a party
unless in writing signed by such party.

(i) Neither party may assign its rights or delegate the
performance of its obligations without the prior written
consent of the other, except to an "Affiliate". For purposes
hereof an Affiliate shall mean an entity or person
controlling, controlled by, or under common control with a
party. No such assignment or delegation shall relieve the
assignor of its obligations. Without limiting the foregoing
provisions of this paragraph, any acquirer of any Project, or
of control thereof, shall be bound by the payment provisions
of this Agreement to the extent KAI's Interest was not sold or
liquidated in connection with such acquisition.

IN WITNESS WHEREOF the parties hereto have set their hands hereto
effective the date first above written.

KAMSKY ASSOCIATES, INC. SHOREWOOD PACKAGING
CORPORATION

By: /s/ Virginia Kamsky By: /s/ Howard Liebman
-------------------------------- --------------------------------
Virginia Kamsky, President Howard Liebman,
Executive Vice President

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EXHIBIT A
---------

The Interest if and when issued to KAI may be disposed of as follows:

1. In the event that a bona fide written offer has been received by
KAI to purchase its Interest, Shorewood shall be notified in
writing by KAI, within five (5) days of the receipt of such offer,
of the terms thereof. Shorewood shall thereafter have fifteen (15)
business days within which to match such offer upon substantially
identical terms contained in the offer by notifying KAI in writing
to that effect. If matched, Shorewood shall purchase the Interest
within thirty (30) days of its acceptance by the payment in U.S.
Dollars required thereunder by making payment to KAI at the address
as herein set forth. If Shorewood's matching right has expired, KAI
shall be able to sell the Interest upon terms and conditions not
more favorable to the offeror than the terms of the aforementioned
offer within sixty (60) days thereafter and if not consummated
within such sixty (60) day period then the Interest may not be sold
by KAI except in the manner hereinabove set forth. In all events
Shorewood has the right to disapprove of a sale of the Interest or
any portion thereof to any person whom Shorewood, in good faith,
considers to be a competitor of Shorewood's. Nothing herein shall
preclude KAI from transferring all or any part of its Interest to
any Affiliate or principal of KAI.

2. All but not some of the Interest may be "put" by KAI to Shorewood
after KAI has held the same for at least three (3) years after the
Project(s) produces its first commercial product and the purchase
price for the Interest to be paid by Shorewood shall be determined
as follows:

(a) if the Interest is common stock or any other security and if
any shares of common stock of the Project(s) or other security are
being traded publicly then the purchase price per share shall be
the average selling price per share of such stock at the end of
each of the thirty (30) days preceding the written offer to
Shorewood, or

(b) in all other cases not covered by Paragraph 2(a) above, then at
a purchase price per share or unit on the date upon which Shorewood
shall have received KAI's offer to sell, determined by an
internationally recognized investment banker who has been mutually
selected by KAI and Shorewood within thirty (30) days of the
receipt of such offer by KAI. In all other cases not covered by
Paragraph 2(a) above, and if such banker has not been selected by
the parties, then such investment banker shall be selected by the
American Arbitration Association located in New York City upon the
application of either party with both parties sharing equally in
any expenses thereof. Absent fraud or similar wrongdoing, the
determination of the investment banker shall be final and shall be
enforceable in accordance with paragraph 10(b) of this Agreement.
Payment in U.S. Dollars to KAI shall be promptly made upon the
determination of the purchase price per share of such Interest and
the release and assignment of the interest by KAI. In making such
determination, the investment

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banker shall not take into account any discount for KAI's minority
interest, for the illiquidity of such interest, or similar
considerations.

3. In the event that Shorewood has accepted an offer to sell any or
all of its equity in the Project(s), Shorewood shall promptly
notify KAI in writing of the written terms thereof and KAI shall
have the right to include its Interest in such sale in the same
proportion that the equity to be sold by Shorewood bears to the
total equity of the Project(s). KAI must notify Shorewood in
writing, within ten (10) days after written notice of the intended
sale, that it desires to include its Interest, to the extent of the
aforementioned proportion, in the sale thereof; otherwise, it shall
have no further right to have its Interest sold.

4. KAI's profit percentage shall be at the following levels:

<TABLE>
<CAPTION>
Aggregate Invested Capital in
Project(s) (not inclusive of loans
from unrelated third parties, in KAI PROFIT INTEREST
millions of U.S.$) (percentage)
- ---------------------------------------- ---------------------------

<S> <C>
up to 24.99 5.0
25 - 29.99 4.75
30 - 34.99 4.50
35 - 39.99 4.25
40 - 44.99 4.0
45 - 49.99 3.75
50 - 54.99 3.50
55 - 59.99 3.25
60 - 64.99 3.0
65 - 74.99 2.75
75 - 84.99 2.50
85 - 94.99 2.25
95 and above 2.0
</TABLE>

5. KAI's profit percentage for any given Project shall be determined
by reference to the above chart in Paragraph 4 of this Exhibit,
based upon the aggregate capital investment by Shorewood in China
(as to which KAI has been issued an interest) as of the date of the
issuance of the Interest relating to the Project.

<PAGE> 1
Exhibit 15

SHOREWOOD PACKAGING CORPORATION
-----------------

NON-QUALIFIED STOCK OPTION AGREEMENT

STOCK OPTION AGREEMENT dated as of October 30, 1998, between
Shorewood Packaging Corporation, a Delaware corporation, with its principal
office at 277 Park Avenue, New York, New York, 10172, (the "Company") and
Jefferson Capital Group, Ltd., a Virginia corporation, with its principal office
at One James Center, Suite 1600, Richmond, Virginia, 23219, (the "Optionee").

WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and its stockholders to grant to
the Optionee an option to purchase 50,000 shares of the common stock, par value
$.0l per share (the "Common Stock") of the company in recognition of the
Optionee's services to the Company during the Queens transaction and as an
inducement to perform additional services on behalf of the Company; and

WHEREAS, R. Timothy O'Donnell ("O'Donnell"), the managing
director of Optionee, is also a director of Company; and

WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and its stockholders to grant
the Optionee certain rights pursuant to the terms of this Agreement in
recognition of the Optionee's services to the Company and as an inducement to
perform additional services on behalf of the Company.

NOW, THEREFORE, the parties agree as follows:

1. Grant of Option
---------------

1.1 The Company grants to the Optionee, on the terms and
conditions hereinafter set forth, an option (the "Option") to purchase 50,000
shares of Common Stock of the Company (the "Option Shares").

1.2 The Option does not qualify for "ISO" treatment to the
extent permitted by Section 422A of the Internal Revenue Code of 1986, as
amended.

1.3 The Option Shares are not, and are not required to be,
registered under the Securities Act of 1933, as amended, (the "Securities Act")
but may be listed upon any securities exchange upon which the Company's Common
Stock is listed at the time of such issuance and sale.
<PAGE> 2
2. Price and Payment for Shares
----------------------------

2.1 The purchase price for the Option Shares shall be
$16.00 per share (the closing price of Company common stock on the date of this
agreement).

2.2 Payment of the purchase price upon exercise of the
Option may be made in cash or check subject to collection.

3. Period of Option and Certain Limitations on Right to
----------------------------------------------------
Exercise and Right to Sell Stock Received Upon Exercise of the Option.
- ----------------------------------------------------------------------
3.1 The period of the Option will be five years from the
date the option is granted, which date is first written above (the "Period").
The Option will be exercisable, in whole or in part, at any time during the
Period.

3.2 Optionee understands and acknowledges that by virtue
of O'Donnell's status as a director of the Company, the subsequent sale by
Optionee of the shares may be subject to Securities and Exchange Commission Rule
10b-5 and Exchange Act Section 16(b), restricting transactions in Company
securities by certain corporate insiders. Moreover, the purchase and sale of any
securities of the Company by O'Donnell and/or any entity controlled by or under
common control with O'Donnell are subject to the Company's insider trading
policies as promulgated from time to time.

4. Exercise of Option
------------------

4.1 The Option herein granted shall be exercisable, in
whole or in part, from time to time by notice in writing from the Optionee to
the Company which notice shall be signed by a duly authorized officer of the
Optionee. Such notice shall specify the number of Option Shares with respect to
which the Option is then being exercised and shall be accompanied, pursuant to
Section 2 hereof.

4.2 Upon the exercise of the Option in whole or in part,
the Company shall promptly issue stock certificates for the shares of Common
Stock purchased and the Optionee shall be deemed to be the holder of the shares
of Common Stock purchased as of the date of issuance of certificates for such
shares to it. The Company may delay issuing certificates representing Option
Shares for a reasonable period of time pending listing on any stock exchange.
The Optionee will not be nor deemed to be, a holder of any shares subject to the
Option unless and until certificates for such shares are issued to it or them
under the terms of this Agreement.

2
<PAGE> 3
4.3 If and when the Option is exercised, the certificates
to be issued evidencing shares of the Company's Common Stock will be restricted
stock and shall bear a legend substantially as follows:

"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended. No
transfer, sale or other disposition of these shares may be
made except pursuant to Rule 144 under the Securities Act
of 1933, as amended, or unless a registration statement
with respect to these shares has become effective under
said Act, or the Company is furnished with an opinion of
counsel satisfactory in form and substance to the Company
that such registration is not required."

5. Transferability of Options
--------------------------

The Option shall not be assignable or transferable by the
Optionee to any other individual or entity without the prior written consent of
the Company, which may be withheld in its reasonable discretion.

6. Acceleration of Option Exercise
-------------------------------

Upon the occurrence of any of the following events, the
Option shall be exercisable only within the 30 calendar days next succeeding the
occurrence of the relevant Triggering Event (as defined below), so long as such
exercise occurs within the Period and then only (a) by an authorized officer of
the Optionee on the Optionee's behalf and (b) if and to the extent that the
Optionee was entitled to exercise the Option at the date of the stockholder
approval of the Change of Control:

(a) the event that the stockholders of the Company have
approved an agreement to merge or consolidate with or into another corporation
(and the Company is not the survivor of such merger or consolidation) or an
agreement to sell or otherwise dispose of all or substantially all of the
Company's assets (including a plan of liquidation) ("Change of Control") (the
date of the stockholder approval of the Change of Control shall be the
Triggering Event for purposes of this Subsection (a)).

(b) intentionally omitted.

7. Piggy-Back Registration
-----------------------

Subject to Sections 8 and 12 hereof, if at any time after
the date of this

3
<PAGE> 4
Agreement during the Period, the Company in addition to any of the holders of
the Common Stock other than the Optionee propose to file a registration
statement to register any security of the Company (other than Common Stock
issued with respect to any acquisition or any employee stock option, stock
purchase or similar plan) under the Securities Act for sale to the public in an
underwritten offering upon which may be registered securities similar to the
Option Shares, it will at each such time give written notice to the Optionee of
its intention to do so ("Notice of Intent") and, upon the written request of the
Optionee made within 30 calendar days after the receipt of any such notice
(which request must specify that the Optionee intends to dispose of all of the
Option Shares held by the Optionee on the date the Notice of Intent is received
by the Optionee, and state the intended method of disposition thereof), the
Company will use its best efforts to effect the registration under the
Securities Act of the Option Shares which the Company has been so requested to
register, to the extent requisite to permit the intended disposition; provided,
however, that if the managing underwriter shall certify in writing that
inclusion of all of the Option shares would, in such managing underwriter's
opinion, materially interfere with the proposed distribution of the securities
in respect of which registration was originally to be effected (x) at a price
reasonably related to fair value, and (y) under circumstances which will not
materially and adversely affect the market of the Company's securities (such
writing to state the basis of such opinion and the maximum number of shares
which may be distributed without such interference), then the Company may, upon
written notice to the Optionee, have the right to exclude from such registration
such number of Option Shares which it would otherwise be required to register
hereunder as is necessary to reduce the total amount of securities to be so
registered to the maximum amount which can be so marketed.

8. Registration Expenses
---------------------

The costs and expenses (other than underwriting discounts
and commissions) of all registrations and qualifications under the Securities
Act, and of all other actions the Company is required to take or effect pursuant
to this Agreement shall be paid by the Company (including, without limitation,
all registration and filing fees, printing expenses, fees and expenses of
complying with Blue Sky laws, and fees and disbursements of counsel for the
Company and of independent public accountants; provided, however, that fees and
expenses of complying with Blue Sky laws in those states where Option Shares and
no other securities of the Company covered by the registration statement will be
offered for sale, shall be paid by the Optionee).

9. Registration Procedures
-----------------------

If and whenever the Company is required to effect the
registration of any Option Shares under the Securities Act as provided in this
Agreement, the Company will promptly:

4
<PAGE> 5
(i) prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement on such form as the Company
may select with respect to such Option Shares and use its best efforts to cause
such registration statement to become effective;

(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all such Option Shares and other securities covered by
such registration statement until such time as all of such Option Shares and
other securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement, but in no event for a period of more than nine months after such
registration statement becomes effective;

(iv) use its best efforts to register or qualify the Option
Shares covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions within the United States of America
(including territories and commonwealths thereof) as the seller shall reasonably
request, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any jurisdiction;

(v) notify the Optionee when a prospectus relating to the
Option Shares is required to be delivered under the Securities Act within the
period mentioned in subdivision (ii) of this paragraph, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing (and upon receipt of such notice and until a supplemented or amended
prospectus as set forth below is available, the Optionee shall not offer or sell
any securities covered by such registration statement and shall return all
copies of such prospectus to the Company if requested to do so by it); and

(vi) furnish to the Optionee, at the time of the
disposition of any

5
<PAGE> 6
Option Shares by him, a signed copy of an opinion of counsel to the effect that:
(a) a registration statement covering such Option Shares has been filed with the
Commission under the Securities Act and has been made effective by order of the
Commission, (b) said registration statement and the prospectus contained therein
comply as to form in all material respects with the requirements of the
Securities Act, (c) no stop order has been issued by the Commission suspending
the effectiveness of such registration statement and (d) the applicable
provisions of the securities or Blue Sky laws of each state in which the Company
shall be required, pursuant to clause (iv) of this paragraph, to register or
qualify such Option Shares, have been complied with, assuming the accuracy and
completeness of the information furnished to such counsel with respect to each
filing relating to such laws; it being understood that such opinion may contain
such qualifications and assumptions as are customary in the rendering of similar
opinions, and that such counsel may rely, as to all factual matters treated
therein, on certificates of the Company.

The Company may require the Optionee to furnish the Company
such information regarding it and the distribution of such Option Shares as the
Company may from time to time request in writing and as shall be required by law
to effect such registration.

10. Termination of Obligations
--------------------------

The obligations of the Company imposed by Sections 7
through 9 above shall cease and terminate, as to any particular Option Shares,
(a) when such shares shall have been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
securities, or (b) when in the opinion of counsel for the Company such
restrictions are no longer required in order to insure compliance with the
Securities Act or (c) seven years and one day after the date hereof. Whenever
such restrictions shall terminate as to any Option Shares, the Optionee shall be
entitled to receive from the Company without expense a new certificate or
certificates representing such securities not bearing the legend set forth in
Section 4.3 hereto.

11. Availability of Information
---------------------------

The Company will use its best efforts to comply with the
reporting requirements of Sections 13 and 15(d) of the Securities Exchange Act
of 1933 to the extent it shall be required to do so pursuant to such Sections,
and at all times while so required shall use its best efforts to comply with all
other public information reporting requirements of the Commission (including
reporting requirements which serve as a condition to utilization of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any Option Shares. The Company will also cooperate with the
Optionee in supplying such information and documentation as may be necessary for
him to complete and file any information reporting forms

6
<PAGE> 7
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Option
Shares.

12. Registration Rights Condition
-----------------------------

Notwithstanding any other provision contained herein, the
Company shall not be obligated to comply with any demands for registration of
Option Shares under the Securities Act if, at the time of such demand by the
Optionee:

(i) he is free to sell all of the Option Shares with
respect to which such registration was requested in accordance with Rule 144
promulgated under the Securities Act or any similar rule or regulation
promulgated under the Securities Act; or

(ii) the Company has in effect a registration statement
covering the disposition of the Option Shares.

13. Dilution or Other Adjustments
-----------------------------

In the event of any change in the Common Stock subject to
the Option granted by this Agreement through merger, consolidation,
reorganization, recapitalization, stock split, stock dividend, or the issuance
to stockholders of rights to subscribe to stock of the same class, or in the
event of any change in the capital structure, the Board of Directors of the
Company shall on an equitable basis make such adjustments with respect to (i)
the number of shares of Common Stock of the Company subject to the Option, (ii)
options granted hereunder, or (iii) any provision of this Agreement, in order to
prevent dilution or enlargement of the Option and the rights granted hereunder.

14. Miscellaneous
-------------

14.1 This Agreement shall be governed by the laws of the
State of New York.

14.2 Any and all notices referred to herein shall be
sufficient if furnished in writing and delivered in person or mailed by
certified mail (return receipt requested) to the respective parties at their
addresses set forth above or to such other address as either party may from time
to time designate in writing.

14.3 As used herein, the masculine gender shall include
the feminine gender.

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above mentioned.

7
<PAGE> 8
SHOREWOOD PACKAGING CORPORATION

By: /s/ Howard M. Liebman
-------------------------------------
Howard M. Liebman
Executive Vice President and
Chief Financial Officer

JEFFERSON CAPITAL GROUP, LTD.

By: /s/ R. Timothy O'Donnell
-------------------------------------
R. Timothy O'Donnell
Managing Director

<PAGE> 1
Exhibit 16

FORM OF
TRUST AGREEMENT

This Agreement made this day of , 1999, by and between
Shorewood Packaging Corporation, a New York corporation (the "Company"), and
___________ (the "Trustee");

WHEREAS, Company has adopted the Shorewood Packaging
Corporation Employee Severance Plan (the "Plan"); and

WHEREAS, Company may incur liability under the terms of the
Plan upon a Change in Control (as defined in the Plan); and

WHEREAS, Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust, subject to the terms hereof,
assets that shall be held therein, subject to the claims of Company's creditors
in the event of Company's Insolvency, as herein defined, until paid to Plan
participants and their beneficiaries in such manner and at such times as
specified in the Plan; and

WHEREAS, subject to the terms hereof, it is the intention of
Company to make contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities, if any, under the Plan;

NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:

SECTION 1. ESTABLISHMENT OF TRUST

(a) Company hereby deposits with Trustee in trust the sum of
one hundred dollars ($100), which shall become the principal of the Trust to be
held, administered and disposed of by Trustee as provided in this Trust
Agreement.

(b) The Trust hereby established is revocable by Company;
provided, however, that it shall be irrevocable upon a Change in Control.
<PAGE> 2
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the
"Code"), and shall be construed accordingly.

(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general creditors
as herein set forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against Company. Any assets held by the Trust will be subject to the claims of
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.

(e) Immediately prior to a Change in Control, the Chief
Executive Officer of Company (or his or her designee) (such individual, the
"CEO") shall authorize a cash contribution to be made to the Trust in an amount
equal to the amount that, in the determination of Company, is sufficient to pay
each Plan participant or beneficiary the benefits to which Plan participants or
their beneficiaries would be entitled pursuant to the terms of the Plan as of
the date of the Change in Control assuming each participant terminated
employment as of such date under circumstances giving rise to payment of
benefits under the Plan. In addition, Company shall also fund, an expense
reserve for Trustee in the amount of $100,000. After a Change in Control,
Trustee may compel any contribution that is required under the Trust.

SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES.

(a) Upon the occurrence of a Change in Control, the Company
shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the
amounts payable in respect of each Plan participant (and his or her
beneficiaries), that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount is
to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment

2
<PAGE> 3
of benefits pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.

(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined under the Plan, and
any claim for such benefits shall be considered and reviewed under the
procedures, if any, set out in the Plan.

(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. Company shall notify Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, Company shall make the balance of each such payment as it
falls due.

SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.

(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent. Company shall
be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.

(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the Trust shall be
subject to claims of general creditors of Company under federal and state law as
set forth below.

(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of Company
alleges in writing to Trustee that Company has become Insolvent,
Trustee shall, in its sole discretion, determine whether Company is
Insolvent and, pending such determination, Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.

3
<PAGE> 4
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to
be a creditor alleging that Company is Insolvent, Trustee shall have no
duty to inquire whether Company is Insolvent. Trustee may in all events
rely on such evidence concerning Company's solvency as may be
furnished to Trustee and that provides Trustee with a reasonable basis
for making a determination concerning Company's solvency.

(3) If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of the
Trust for the benefit of Company's general creditors. Nothing in this
Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under the Plan or
otherwise.

(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with Section 2
of this Trust Agreement only after Trustee has determined that Company
is not Insolvent (or is no longer Insolvent).

(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance, plus interest on such
unpaid amount, determined for the period commencing on the date such amount
should have been paid and ending on the date of such payment, at an annual rate
equal to the prime rate (as in effect from time to time at[ ]Bank).

SECTION 4. PAYMENTS TO COMPANY.

Except as provided in Section 3 hereof, after the Trust has
become irrevocable, Company shall have no right or power to direct Trustee to
return to Company or to divert to others any of the assets of the Trust before
(a) all payments

4
<PAGE> 5
of benefits have been made to Plan participants and their beneficiaries pursuant
to the terms of the Plan and (b) all expenses of the Trust have been paid.

At any time prior to the Trust becoming irrevocable, Company
shall have the right or power to direct Trustee to return to Company any of the
assets of the Trust.

SECTION 5. INVESTMENT AUTHORITY.

(a) All rights associated with assets of the Trust shall be
exercised by Trustee or the person designated by Trustee, and shall in no event
be exercisable by or rest with Plan participants.

(b) Trustee shall not be liable in discharging its duties
hereunder if it acts for the exclusive benefit of Plan participants and their
beneficiaries, in good faith and as a prudent person would act in accomplishing
a similar task and in accordance with the terms of this Trust Agreement and any
applicable federal or state laws, rules or regulations.

(c) Subject to investment guidelines agreed to in writing from
time to time by Company and Trustee prior to a Change in Control, Trustee shall
have the power in investing and reinvesting the assets of the Trust in its sole
discretion:

(1) To invest and reinvest in any readily marketable
common and preferred stocks, bonds, notes, debentures (including
convertible stocks and securities but not including any stock or
security of Trustee other than a de minimis amount held in a mutual
fund), certificates of deposit or demand or time deposits (including
any such deposits with Trustee) and shares of investment companies and
mutual funds, including any proprietary mutual funds of Trustee,
without being limited to the classes or property in which Trustee is
authorized to invest by any law or any rule of court of any state and
without regard to the proportion any such property may bear to the
entire amount of the assets of the Trust;

(2) To commingle for investment purposes all or any
portion of the assets of the Trust with assets of any other similar
trust or trusts established by Company with Trustee;

(3) To retain any property at any time received by
Trustee;

5
<PAGE> 6
(4) To sell or exchange any property held by it at
public or private sale, for cash or on credit, to grant and exercise
options for the purchase or exchange thereof, to exercise all
conversion or subscription rights pertaining to any such property and
to enter into any covenant or agreement to purchase any property in the
future;

(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan
relating to property held by it and to consent to or oppose any such
plan or any action thereunder or any contract, lease, mortgage,
purchase, sale or other action by any person;

(6) To deposit any property held by it with any
protective, reorganization or similar committee, to delegate
discretionary power thereto, and to pay part of the expenses and
compensation thereof any assessments levied with respect to any such
property to deposited;

(7) To extend the time of payment of any obligation
held by it;

(8) To hold uninvested any moneys received by it,
without liability for interest thereon, but only in anticipation of
payments due for investments, reinvestments, expenses or disbursements;

(9) To exercise all voting or other rights with
respect to any property held by it and to grant proxies, discretionary
or otherwise;

(10) For the purposes of the Trust, to borrow money
from a bank to issue its promissory note or notes therefor, and to
secure the repayment thereof by pledging any property (including but
not limited to any insurance policies) held by it;

(11) To employ and rely upon suitable contractors and
counsel, who may be counsel to Company or to Trustee, and to pay their
reasonable expenses and compensation from the assets of the Trust to
the extent not paid by the Company;

(12) To register investments in its own name or in
the name of a nominee; to hold any investment in bearer form; and to
combine certificates representing securities with certificates of the
same issue held by it in

6
<PAGE> 7
other fiduciary capacities or to deposit or to arrange for the deposit
of such securities with any depository, even though, when so deposited,
such securities may be held in the name of the nominee of such
depository with other securities deposited therewith by other persons,
or to deposit or to arrange for the deposit of any securities issued or
guaranteed by the United States government, or any agency or
instrumentality thereof, including securities evidenced by book entries
rather than by certificates, with the United States Department of the
Treasury or a Federal Reserve Bank, even though, when so deposited,
such securities may not be held separate from securities deposited
therein by other persons; provided, however, that no securities held in
the Trust shall be deposited with the United States Department of the
Treasury or a Federal Reserve Bank or other depository in the same
account as any individual property of Trustee, and provided, further,
that the books and records of Trustee shall at all times show that all
such securities are part of the assets of the Trust;

(13) To settle, compromise or submit to arbitration
any claims, debts or damages due or owing to or from the Trust,
respectively, to commence or defend suits or legal proceedings to
protect any interest of the Trust, and to represent the Trust in all
suits or legal proceedings in any court or before any other body or
tribunal; provided, however, that Trustee shall not be required to take
any such action unless it shall have been indemnified by Company to its
reasonable satisfaction against liability or expenses it might incur
therefrom;

(14) To hold and retain policies of life insurance,
annuity contracts, and other property of any kind which policies are
contributed to the Trust by Company or are purchased by Trustee;

(15) To hold any other class of assets which may be
contributed by Company and that is deemed reasonable by Trustee, unless
expressly prohibited herein; and

(16) Generally, to do all acts, whether or not
expressly authorized, that Trustee may deem necessary or desirable for
the protection of the assets of the Trust.

7
<PAGE> 8
SECTION 6. DISPOSITION OF INCOME.

During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.

SECTION 7. ACCOUNTING BY TRUSTEE.

Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
Company and Trustee. Within ninety (90) days following the close of each
calendar year and within thirty (30) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.

SECTION 8. RESPONSIBILITY OF TRUSTEE.

(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust and is given in writing
by Company. In the event of a dispute between Company and a party, Trustee may
apply to a court of competent jurisdiction to resolve the dispute.

(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments.

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<PAGE> 9
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder.

(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals and rely on
advice given by such professionals to assist it in performing any of its duties
or obligations hereunder.

(e) Trustee shall have, without exclusion, all powers
conferred on Trustees by applicable law, unless expressly provided otherwise
herein, provided, however, that if an insurance policy is held as an asset of
the Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from conversion of the
policy to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.

(f) Notwithstanding any powers granted to Trustee pursuant to
this Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.

SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.

Company shall pay administrative and Trustee's fees and
expenses. If such payments are not made within a reasonable time, the Trustee
may charge the Trust for such fees and expenses.

SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.

(a) Trustee may resign at any time by written notice to
Company, which shall be effective sixty (60) days after receipt of such notice
unless Company and Trustee agree other wise.

(b) Trustee may be removed by Company on sixty (60) days
notice or upon shorter notice accepted by Trustee; provided, however, that on
and after the occurrence of a Change in Control,Trustee may only be removed by
the

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<PAGE> 10
affirmative vote of not less than three-fourths (3/4) of the participants in the
Plan (or their beneficiaries, as applicable).

(c) Upon resignation or removal of Trustee and appointment of
a successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed as soon as practicable, but
in any event within sixty (60) days after receipt of notice of resignation,
removal or transfer.

(d) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses of
Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.

SECTION 11. APPOINTMENT OF SUCCESSOR.

(a) If Trustee resigns or is removed in accordance with
Section 10 hereof, Company may appoint, subject to Section 11(b) below, any
third party national banking association with a market capitalization exceeding
$1,000,000,000 to replace Trustee upon resignation or removal. The successor
Trustee shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust. The former Trustee shall execute any instrument
necessary or reasonably requested by Company or the successor Trustee to
evidence the transfer.

(b) If Trustee resigns within two years after a Change in
Control, the appointment by Company of a successor trustee in accordance with
Section 11(a) above shall be subject to the approval of a two-thirds majority of
the Plan participants.

(c) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing assets of the
Trust, subject to Sections 7 and 8 hereof. The successor Trustee shall not be
responsible for and Company shall indemnify and defend the successor Trustee
from any claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time it
becomes successor Trustee.

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<PAGE> 11
SECTION 12. AMENDMENT OR TERMINATION.

(a) This Trust Agreement may be amended by a written
instrument executed by Trustee and Company. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.

(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan and all expenses of the Trust have been paid unless
sooner revoked in accordance with Section 1(b) hereof. Upon termination of the
Trust, any assets remaining in the Trust shall be returned to Company.

(c) No provision of this Trust Agreement may be amended by
Company in any manner adverse to Plan participants and beneficiaries following a
Change in Control.

SECTION 13. MISCELLANEOUS.

(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without invalidating
the remaining provisions hereof.

(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.

(d) For purposes of this Trust, a "Change in Control" shall
have the meaning ascribed to such term in the Plan.

(f) For purposes of this Section 13, "Affiliate" shall have
the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange
Act.

(g) For purposes of this Section 13, "Beneficial Owner" shall
have the meaning set forth in Rule 13d-3 under the Exchange Act.

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<PAGE> 12
(h) For purposes of this Section 13, "Exchange Act" shall mean
the Securities Exchange Act of 1934, as amended from time to time.

(i) For purposes of this Section 13, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
Affiliates, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.

SECTION 14. EFFECTIVE DATE.

The effective date of this Trust Agreement shall be , 1999.

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<PAGE> 13
IN WITNESS WHEREOF, this instrument has been executed as of
the day and year first above written.

SHOREWOOD PACKAGING CORPORATION

By:_____________________________

Title:__________________________

[TRUSTEE]

By:____________________________

Title:_________________________

<PAGE> 1
EXHIBIT 17

SHOREWOOD PACKAGING CORPORATION
EMPLOYEE SEVERANCE PLAN

The Company hereby adopts the Shorewood Packaging Corporation
Employee Severance Plan for the benefit of certain employees of the Company and
its Affiliates, on the terms and conditions hereinafter stated. All capitalized
terms used herein are defined in Section 1 hereof.

SECTION 1. DEFINITIONS. As hereinafter used:

1.1 "Affiliate" shall have the meaning set forth in Rule 12b-2
under Section 12 of the Exchange Act.

1.2 "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.

1.3 "Board" means the Board of Directors of the
Company.

1.4 "Cause" means (i) the willful and continued failure by the
Eligible Employee to substantially perform the Eligible Employee's duties with
the Employer (other than any such failure resulting from the Eligible Employee's
incapacity due to physical or mental illness), or (ii) the willful engaging by
the Eligible Employee in conduct which is demonstrably injurious to the Company,
monetarily or otherwise. For purposes of this definition, no act, or failure to
act, on the Eligible Employee's part shall be deemed "willful" unless done, or
omitted to be done, by the Eligible Employee not in good faith or without
reasonable belief that the Eligible Employee's act, or failure to act, was in
the best interest of the Company.

1.5 A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:

(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially
owned by such Person any securities acquired directly
from the Company or its affiliates) representing 30%
or more of the combined voting power of the Company's
then outstanding securities, excluding any Person who
becomes such a
<PAGE> 2
Beneficial Owner in connection with a transaction
described in clause(A) of paragraph (iii) below; or

(ii) the following individuals cease for any
reason to constitute a majority of the number of
directors then serving: individuals who, on the date
hereof, constitute the Board and any new director
(other than a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a
consent solicitation, relating to the election of
directors of the Company) whose appointment or
election by the Board or nomination for election by
the Company's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of
the directors then still in office who either were
directors on the date hereof or whose appointment,
election or nomination for election was previously
so approved or recommended; or

(iii) there is consummated a merger or
consolidation of the Company or any direct or
indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation
which results in the directors of the Company
immediately prior to such merger or consolidation
continuing to constitute at least a majority of the
board of directors of the Company, and, if
applicable, the surviving entity or any parent
thereof or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities Beneficially Owned by such Person any
securities acquired directly from the Company or its
Affiliates) representing 40% or more of the combined
voting power of the Company's then outstanding
securities; or

(iv) the shareholders of the Company approve
a plan of complete liquidation or dissolution of the
Company or there is consummated an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets, other than
a sale or disposition by the Company of all or
substantially all of the Company's assets to an
entity, at least 60% of the combined voting power of
the voting securities of which are owned by
shareholders of the

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<PAGE> 3
Company in substantially the same proportions as
their ownership of the Company immediately prior to
such sale.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

1.6 "Code" means the Internal Revenue Code of 1986, as it may
be amended from time to time.

1.7 "Company" means the Shorewood Packaging Corporation or
any successors thereto.

1.8 "Eligible Employee" means any employee who is a Tier 1,
Tier 2, or Tier 3 Employee. An Eligible Employee becomes a "Severed Employee"
once he or she incurs a Severance.

1.9 "Employer" means the Company or any of its Affiliates
which is an employer of an Eligible Employee.

1.10 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.

1.11 "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.

1.12 "Good Reason" in respect of a Tier 2 Employee means, the
occurrence, on or after the date of a Change in Control and without the affected
Tier 2 Employee's written consent, of (i) the assignment of duties in the
aggregate that are inconsistent with the Tier 2 Employee's level of
responsibility immediately prior to the date of the Change in Control or any
diminution in the nature or status of the Tier 2 Employee's responsibilities
from those in effect immediately prior to the date of the Change in Control,
(ii) a reduction by the Employer in the Tier 2 Employee's annual base salary, or
annual incentive compensation opportunity (including equity-based compensation),
from that in effect immediately prior to the Change in Control, or

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<PAGE> 4
(iii) the relocation of the Tier 2 Employee's principal place of employment to a
location more than fifty (50) miles from the Tier 2 Employee's principal place
of employment immediately prior to the date of the Change in Control. "Good
Reason" in respect of a Tier 3 Employee means the occurrence, on after the date
of a Change in Control and without the Tier 3 Employee's written consent, of (i)
a reduction by the Employer in the Tier 3 Employee's annual base salary, or
annual incentive compensation opportunity (including equity-based compensation)
from that in effect immediately prior to the Change in Control or (ii) the
relocation of the Tier 3 Employee's principal place of employment to a location
more than fifty (50) miles from the Tier 3 Employee's principal place of
employment immediately prior to the date of the Change in Control. A "Good
Reason" determination, made by an Eligible Employee in good faith, shall be
conclusive and not subject to review or challenge by the Company.

1.13 "Gross-Up Payment" shall have the meaning set forth in
Section 2.5 hereof.

1.14 "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
Affiliates, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.

1.15 "Plan" means the Shorewood Packaging Corporation Employee
Severance Plan, as set forth herein, as it may be amended from time to time.

1.16 "Plan Administrator" means the person or persons
appointed from time to time by the Board which appointment may be revoked at any
time by the Board.

1.17 "Savings Plan" means the Shorewood Packaging Corporation
Retirement and Savings Plan, or such other similar arrangement of the Company
that is applicable to the Eligible Employee.

1.18 "Severance" means the termination of an Eligible
Employee's employment with the Employer (or, if applicable, a successor to the
Employer) on or

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<PAGE> 5
within two years following the date of the Change in Control, (i) by the
Employer other than for Cause, (ii) in the case of a Tier 1 Employee, by the
Tier 1 Employee for any reason, or (iii) in the case of a Tier 2 or Tier 3
Employee, by the Eligible Employee for Good Reason. A Tier 2 Employee or Tier 3
Employee will not be considered to have incurred a Severance if his or her
employment is discontinued by reason of death or a physical or mental condition
causing his or her inability to substantially perform his or her duties with the
Employer, including, without limitation, such condition entitling him or her to
benefits under any sick pay or disability income policy or program of the
Employer.

1.19 "Severance Date" means the date on or after the date of
the Change in Control on which an Eligible Employee incurs a Severance.

1.20 "Severance Pay" means the payment determined pursuant to
Section 2.1, 2.2, or 2.3 hereof, as applicable.

1.21 "Tier 1 Employee" means each of the Chief Executive
Officer of the Company and the Chief Financial Officer of the Company.

1.22 "Tier 2 Employee" means an individual so designated on
Schedule A hereto.

1.23 "Tier 3 Employee" means an individual so designated on
Schedule A hereto.

SECTION 2. BENEFITS.

2.1 Each Tier 1 Employee who incurs a Severance shall be
entitled, subject to Section 2.12, to receive Severance Pay equal to (i) the sum
of his annual base salary, his highest annual bonus received in the three years
immediately preceding the year in which the Change in Control occurs, and the
value of matching contributions made by the Company to the Savings Plan on his
behalf with respect to the calendar year immediately preceding the calendar year
of the Change in Control, (ii) multiplied by 3. The Severance Pay payable to a
Tier 1 Employee shall be reduced by any amounts paid to him under his employment
agreement by reason of a termination following a "Change in Control" (as defined
in his employment agreement). For purposes of this Section, annual base salary
shall be determined immediately prior to the Severance (without regard to any
reductions therein which would

5
<PAGE> 6
constitute Good Reason for termination if the Tier 1 Employee were a Tier 2
Employee).

2.2 Each Tier 2 Employee who incurs a Severance shall be
entitled, subject to Section 2.12, to receive Severance Pay equal to (i) the sum
of his or her annual base salary, his or her highest annual bonus received in
the three years immediately preceding the year in which the Change in Control
occurs, and the value of matching contributions made by the Company to the
Savings Plan on his or her behalf with respect to the calendar year immediately
preceding the calendar year of the Change in Control, (ii) multiplied by 2. For
purposes of this Section, annual base salary shall be determined immediately
prior to the Severance (without regard to any reductions therein which
constitute Good Reason for termination by a Tier 2 Employee).

2.3 Each Tier 3 Employee who incurs a Severance shall be
entitled, subject to Section 2.12, to receive Severance Pay equal to the sum of
his or her annual base salary, his or her highest annual bonus received in the
three years immediately preceding the year in which the Change in Control
occurs, and the value of matching contributions made by the Company to the
Savings Plan on his or her behalf with respect to the calendar year immediately
preceding the calendar year of the Change in Control. For purposes of this
Section, annual base salary shall be determined immediately prior to the
Severance (without regard to any reductions therein which constitute Good Reason
for termination by a Tier 3 Employee).

2.4 Severance Pay shall be paid to an eligible Severed
Employee in a cash lump sum, as soon as practicable following the Severance
Date, but in no event later than twenty (20) business days immediately following
the expiration of the revocation period, if any, applicable to such Severed
Employee's release, described in Section 2.12.

2.5 (i) If any of the payments or benefits received or to be
received by a Tier 1 Employee in connection with the Change in Control or his or
her termination of employment (whether pursuant to the terms of this Plan or
any other plan, arrangement or agreement) (such payments or benefits, excluding
the Gross-Up Payment, being hereinafter referred to as the "Total Payments")
will be subject to the Excise Tax, the Company shall pay to the Eligible
Employee an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Eligible Employee, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income and employment taxes and
Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. The
amount of the Gross-Up

6
<PAGE> 7
Payment, if any, shall be determined by the Plan Administrator or any person or
entity designated by the Plan Administrator. The Gross-Up Payment, if any, (a)
with respect to a Severed Employee, shall be paid in a cash lump sum, as soon as
practicable following the Severance Date, but, in any event, not later than
twenty (20) business days immediately following the expiration of the revocation
period, if any, applicable to such Severed Employee's release, described in
Section 2.12, and, (b) with respect to any other Eligible Employee, shall be
paid in a cash lump sum not later than twenty (20) business days immediately
following the receipt of payments subject to the Excise Tax. The provisions of
this Section 2.5 shall supersede the provisions of any other agreement between
the Company and a Severed Employee which prevent the Company from making any
payment to a Severed Employee if such payment would fail to be deductible by
reason of being an "excess parachute payment".

(ii) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in calculating
the Gross-Up Payment, the Eligible Employee shall repay to the Company,
within twenty (20) business days following the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that portion
of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up
Payment being repaid by the Eligible Employee, to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Eligible Employee's taxable income
and wages for purposes of federal, state and local income and
employment taxes), plus interest on the amount of such repayment at
120% of the semiannual compounding short term Applicable Federal Rate
published with respect to the month in which the Gross-Up Payment was
made. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which
cannot be deter mined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Eligible
Employee with respect to such excess) within twenty (20) business days
following the time that the amount of such excess is finally
determined. The Eligible Employee shall notify the Company immediately
of the assertion by any taxing authority of any under payment of tax.
The Eligible Employee and the Company shall each reason ably cooperate
with the other in connection with any administrative or

7
<PAGE> 8
judicial proceedings concerning the existence or amount of liability
for Excise Tax with respect to the Total Payments and in resolving any
dispute with any taxing authority regarding any asserted underpayment
of Excise Tax.

2.6 If any of the payments or benefits received or to be
received by a Tier 2 Employee in connection with a Change in Control (whether
pursuant to the terms of this Plan or any other plan, arrangement or agreement)
will be subject to the Excise Tax, then, after taking into account any reduction
in the Total Payments provided by reason of section 280G of the Code in such
other plan, arrangement or agreement, the Severance Payments shall be reduced to
the extent necessary so that no portion of the Total Payments is subject to the
Excise Tax but only if (A) the net amount of such Total Payments, as so reduced
(and after subtracting the net amount of federal, state and local income taxes
on such reduced Total Payments) is greater than or equal to (B) the net amount
of such Total Payments without such reduction (but after subtracting the net
amount of federal, state and local income taxes on such Total Payments and the
amount of Excise Tax to which the Executive would be subject in respect of such
unreduced Total Payments).

2.7 The Company shall provide each Severed Tier 1 and Tier 2
Employee with individual outplacement services; provided that, however, the
maximum expense in respect of the provision of such services to the Company
shall be $40,000 and $25,000, respectively, for a Tier 1 Employee and a Tier 2
Employee.

2.8 Commencing on the day immediately following a Severed Tier
1, Tier 2 or Tier 3 Employee's Severance Date, until the third, second, or first
anniversary, respectively, of the Severance Date or, if sooner, until such
Severed Tier 1, Tier 2 or Tier 3 Employee obtains employment which provides
substantially similar benefits, the Company shall provide such Severed Employee
and anyone entitled to claim under or through such Severed Employee all benefits
under any group hospitalization, health care plan, dental care plan, life, or
other insurance or death benefit plan, or other present or future similar group
employee benefit plan or program of the Employer to the same extent as if such
Severed Employee had continued to be an employee during such period. The
coverage period for purposes of the group health continuation requirements of
section 4980B of the Code shall commence immediately following the end of such
benefit continuation. In addition, commencing on the day immediately following a
Severed Tier 1, Tier 2 or Tier 3 Employee's Severance Date, until the third,
second, or first anniversary, respectively, of the Severance Date or, if sooner,
until such Severed Tier 1, Tier 2 or Tier 3 Employee obtains employ-

8
<PAGE> 9
ment which provides substantially similar benefits, the Company shall provide
such Severed Employee and anyone entitled to claim under or through such Severed
Employee all fringe benefits to the Severed Employee and his or her family at
least equal to those which were provided to them prior to termination.

2.9 The Company shall reimburse each Tier 1 and Tier 2
Severed Employee for financial counseling and tax planning service costs
incurred within 6 months following the Severance Date; provided that the
aggregate cost of such financial counseling and tax planning services for any
such employee shall not exceed $7,500.

2.10 The Company shall pay to each Tier 1 and Tier 2 Employee
all reasonable legal fees and expenses incurred by such Eligible Employee in
pursuing any claim under the Plan in which such Tier 1 or Tier 2 Employee
prevails in any material respect.

2.11 In the event of a claim by an Eligible Employee as to the
amount or timing of any distribution, such Eligible Employee shall present the
reason for his or her claim in writing to the Plan Administrator. The Plan
Administrator shall, within sixty (60) days after receipt of such written claim,
send a written notification to the Eligible Employee as to its disposition. In
the event the claim is wholly or partially denied, such written notification
shall (a) state the specific reason or reasons for the denial, (b) make specific
reference to pertinent Plan provisions on which the denial is based, (c) provide
a description of any additional material or information necessary for the
Eligible Employee to perfect the claim and an explanation of why such material
or information is necessary, and (d) set forth the procedure by which the
Eligible Employee may appeal the denial of his or her claim. In the event an
Eligible Employee wishes to appeal the denial of his or her claim, he or she may
request a review of such denial by making application in writing to the Plan
Administrator within sixty (60) days after receipt of such denial. Such
Eligible Employee (or his or her duly authorized legal representative) may, upon
written request to the Plan Administrator, review any documents pertinent to his
or her claim, and submit in writing, issues and comments in support of his or
her position. Within sixty (60) days after receipt of a written appeal (unless
special circumstances, such as the need to hold a hearing, require an extension
of time, but in no event more than one hundred twenty (120) days after such
receipt), the Plan Administrator shall notify the Eligible Employee of the final
decision. The final decision shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be

9
<PAGE> 10
understood by the claimant, and specific references to the pertinent Plan
provisions on which the decision is based.

2.12 No Severed Employee shall be eligible to receive
Severance Pay or other benefits under the Plan unless he or she first executes a
written release substantially in the form attached hereto as Schedule B, (or, if
the Severed Employee is not a United States employee, a similar release which is
in accordance with the applicable laws of the relevant jurisdiction).

2.13 An Employer shall be entitled to withhold from amounts to
be paid to the Severed Employee hereunder any federal, state or local
withholding or other taxes or charges (or foreign equivalents of such taxes or
charges) which it is from time to time required to withhold.

SECTION 3. PLAN ADMINISTRATION.

3.1 The Plan Administrator shall administer the Plan and may
interpret the Plan, prescribe, amend and rescind rules and regulations under the
Plan and make all other determinations necessary or advisable for the
administration of the Plan, subject to all of the provisions of the Plan,
including, without limitation, Section 2.11 thereof.

3.2 The Plan Administrator may delegate any of its duties
hereunder to such person or persons from time to time as it may designate.

3.3 The Plan Administrator is empowered, on behalf of the
Plan, to engage accountants, legal counsel and such other personnel as it deems
necessary or advisable to assist it in the performance of its duties under the
Plan. The functions of any such persons engaged by the Plan Administrator shall
be limited to the specified services and duties for which they are engaged, and
such persons shall have no other duties, obligations or responsibilities under
the Plan. Such persons shall exercise no discretionary authority or
discretionary control respecting the management of the Plan. All reasonable
expenses thereof shall be borne by the Employer.

SECTION 4. PLAN MODIFICATION OR TERMINATION.

The Plan may be amended or terminated by the Board at any
time; provided, however, that the Plan may not be terminated or amended during
the pendency of, or within two years following a Change in Control.

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<PAGE> 11
SECTION 5. GENERAL PROVISIONS.

5.1 Except as otherwise provided herein or by law, no right or
interest of any Eligible Employee under the Plan shall be assignable or
transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Eligible Employee under the
Plan shall be liable for, or subject to, any obligation or liability of such
Eligible Employee. When a payment is due under this Plan to a Severed Employee
who is unable to care for his or her affairs, payment may be made directly to
his or her legal guardian or personal representative.

5.2 If an Employer is obligated by law or by contract to pay
severance pay, a termination indemnity, notice pay, or the like, or if an
Employer is obligated by law to provide advance notice of separation ("Notice
Period"), then any Severance Pay hereunder shall be reduced by the amount of any
such severance pay, termination indemnity, notice pay or the like, as
applicable, and by the amount of any compensation received during any Notice
Period.

5.3 Neither the establishment of the Plan, nor any
modification thereof, nor the creation of any fund, trust or account, nor the
payment of any benefits shall be construed as giving any Eligible Employee, or
any person whomsoever, the right to be retained in the service of the Employer,
and all Eligible Employees shall remain subject to discharge to the same extent
as if the Plan had never been adopted.

5.4 If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.

5.5 This Plan shall inure to the benefit of and be binding
upon the heirs, executors, administrators, successors and assigns of the
parties, including each Eligible Employee, present and future, and any successor
to the Employer. If a Severed Employee shall die while any amount would still be
payable to such Severed Employee hereunder if the Severed Employee had continued
to live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Plan to the executor, personal representative
or administrators of the Severed Employee's estate.

11
<PAGE> 12
5.6 The headings and captions herein are provided for
reference and convenience only, shall not be considered part of the Plan, and
shall not be employed in the construction of the Plan.

5.7 The Plan shall not be funded. No Eligible Employee shall
have any right to, or interest in, any assets of any Employer which may be
applied by the Employer to the payment of benefits or other rights under this
Plan.

5.8 Any notice or other communication required or permitted
pursuant to the terms hereof shall have been duly given when delivered or mailed
by United States Mail, first class, postage prepaid, addressed to the intended
recipient at his, her or its last known address.

5.9 This Plan shall be construed and enforced according to
the laws of the New York to the extent not preempted by federal law, which shall
otherwise control.

<PAGE> 1
Exhibit 20

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

CHESAPEAKE CORPORATION and
SHEFFIELD, INC.,
Plaintiffs,

V. No.

SHOREWOOD PACKAGING
CORPORATION,
Defendant.

COMPLAINT

Plaintiffs Chesapeake Corporation ("Chesapeake") and Sheffield, Inc.
("Purchaser," jointly with Chesapeake, "Plaintiffs") file this action seeking
declaratory relief in connection with (i) Plaintiffs' offer to purchase shares
of defendant Shorewood Packaging Corporation's ("Shorewood") common stock, and
(ii) Chesapeake's solicitation of written consents from the stockholders of
Shorewood to take certain actions without a stockholder meeting.

JURISDICTION AND VENUE

1. This Court has jurisdiction over this action pursuant to 15 U.S.C.
(S) 78aa, 28 U.S.C. (S) 1331(a) and 28 U.S.C. (S) 1337(a).

2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28
U.S.C. (S) 1391(b).

THE PARTIES

3. Plaintiff Chesapeake is a corporation incorporated under the laws of
the Commonwealth of Virginia with its principal executive offices located in
Richmond, Virginia. Chesapeake is primarily engaged in the manufacture and sale
of specialty packaging, point-of-purchase displays, and merchandising services.
Chesapeake's shares are listed on the New York Stock Exchange ("NYSE").
Chesapeake is a beneficial owner of Shorewood common stock.
<PAGE> 2
4. Plaintiff Purchaser is a corporation incorporated under the laws of
the State of Delaware and a wholly-owned subsidiary of Chesapeake. Purchaser was
formed to acquire all of the outstanding shares of Shorewood through the tender
offer and merger proposal described below. Purchaser is the record owner of 100
shares of Shorewood common stock.

5. Defendant Shorewood is a corporation incorporated under the laws of
the State of Delaware with its principal executive offices located in New York,
New York. Shorewood and its subsidiaries print and manufacture paperboard
packaging through operations in the United States, Canada and China.

6. Shorewood's common stock is registered pursuant to Section 12(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. (S) 781(b),
and is listed and traded on the NYSE.

THE TENDER OFFER

7. Plaintiffs commenced today a fully-financed, non-coercive, non
discriminatory, all-cash, all-shares premium tender offer for Shorewood's common
stock at $17.25 per share (the "Tender Offer"). Chesapeake commenced the Tender
Offer by issuing a press release summarizing the terms of the Tender Offer (the
"Press Release") and publishing a summary advertisement of the Tender Offer in
the national edition of The Wall Street Journal (the "Summary Advertisement").

8. Shorewood stockholders whose shares are purchased by Purchaser in
the Tender Offer will receive $17.25 per share in cash. The $17.25 in cash
offered in the Tender Offer represents approximately a 45% premium over the
closing price of Shorewood's common stock on November 9, 1999, the last full
trading day before Chesapeake made a confidential proposal to acquire Shorewood
in a negotiated transaction at $16.50 per share. The $17.25 in cash offered in
the Tender Offer represents more than a 28% premium above the closing price of
Shorewood's stock on November 17, 1999, the last full trading day before
Shorewood disclosed to the markets Chesapeake's confidential proposal. The
Tender Offer is conditioned upon, among other things, (i) the tender and
purchase of sufficient Shorewood shares to give Plaintiffs a majority of the
outstanding Shorewood shares on a fully diluted basis, (ii) the exemption of the
Tender Offer from Section 203 of the Delaware General Corporation Law ("Section
203"), and (iii) the redemption or inapplicability of Shorewood's stockholder
rights plan (the "Rights Plan").

9. The Tender Offer is the initial step in a two-step transaction
pursuant to which Chesapeake proposes to acquire all of the outstanding shares
of Shorewood

2
<PAGE> 3
stock. If successful, Chesapeake intends to follow the Tender Offer with a
merger or similar business combination with Purchaser or a direct or indirect
subsidiary of Chesapeake (the "Proposed Merger," and together with the Tender
Offer, the "Proposed Acquisition"). Pursuant to the Proposed Merger, it is
currently anticipated that each then outstanding share of Shorewood (other than
shares owned by Chesapeake or any of its subsidiaries or shares held in the
treasury of Shorewood) would be converted into the right to receive an amount in
cash equal to the price paid in the Tender Offer.

10. The Tender Offer is, and will continue to be, in full compliance
with all applicable federal laws and regulations governing tender offers, i.e.,
the provisions of the Williams Act, embodied in Sections 14(d) and 14(e) of the
Exchange Act, 15 U.S.C. (S)(S) 78n(d) and (e), and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission ("SEC"). In
accordance with the Exchange Act and the rules and regulations promulgated
thereunder by the SEC, Plaintiffs commenced the Tender Offer by issuing the
Press Release and publishing the Summary Advertisement. In connection with the
Tender Offer and in accordance with the Exchange Act and the rules and
regulations promulgated thereunder by the SEC, Plaintiffs will file promptly,
and in any event within five business days, a Schedule 14D-1 with the SEC (the
"Schedule 14D-1") pursuant to Section 14(d)(1) of the Exchange Act and Rule
14d-3 promulgated thereunder, 17 C.F.R. (S) 240.14d- 3.

11. Section 14(d) of the Exchange Act, 15 U.S.C. (S) 78n(d), and the
rules and regulations promulgated thereunder by the SEC, require that any person
or entity making a tender offer for beneficial ownership of more than five
percent of a class of registered equity securities file and disclose certain
specified information with respect to the tender offer. Any such bidder must
disclose, among other things, its identity and background, past contacts,
transactions or negotiations between the bidder and the company in whom the
bidder seeks to acquire stock, the source and amount of funds needed for the
tender offer, and any plans the bidder may have to change the capitalization,
corporate structure or business of the company whose stock it seeks to acquire.

12. In addition, Section 14(e) of the Exchange Act, 15 U.S.C. (S)
78n(e), makes it "unlawful for any person to make any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statement made, in light of the circumstances under which they are made, not
misleading, or to engage in any fraudulent, deceptive, or manipulative acts or
practice in connection with any tender offer." Plaintiffs have complied fully
with the Exchange Act and all rules and regulations promulgated thereunder.

3
<PAGE> 4
13. In connection with the Tender Offer, Plaintiffs will disseminate to
Shorewood's stockholders an offer to purchase containing all material
information required by applicable law to be disclosed (the "Offer to
Purchase").

THE CONSENT SOLICITATION

14. In furtherance of the Proposed Acquisition, Chesapeake publicly
disclosed in the Press Release its intention to solicit written consents from
Shorewood's stockholders to take certain actions without a stockholder meeting
(the "Consent Solicitation"). The purpose of the Consent Solicitation is to
obtain sufficient consents from Shorewood's stockholders in order to (i) amend
Shorewood's bylaws to remove the provision establishing a staggered board of
directors, (ii) remove all current members of the Shorewood Board, (iii) reduce
the authorized number of Shorewood directors to three, (iv) elect to the
Shorewood Board three individuals nominated by Chesapeake (the "Nominees"), and
(v) repeal any recent or subsequent amendments to the Shorewood Amended and
Restated By-laws (the "Bylaws"). If elected, the Nominees will consider, subject
to their fiduciary duties, (i) redeeming the Rights Plan (or amending the Rights
Plan to make it inapplicable to the Proposed Acquisition), (ii) approving the
Tender Offer under Section 203, and (iii) taking such other actions as may be
required to expedite the prompt consummation of the Proposed Acquisition.

15. Section 14(a) of the Exchange Act, 15 U.S.C. (S) 78n(a), and the
rules and regulations promulgated thereunder by the SEC, require that a person
soliciting an authorization with respect to any registered security file and
disclose certain specific information with respect to the solicitation. Any such
solicitor must disclose, among other things, its identity, the date, time and
place when the proposed action will be taken, and any substantial interest of
the solicitor in the matters to be acted upon. In addition, Rule 14a-9, 17
C.F.R. (S) 240.14a-9, promulgated by the SEC under Section 14(a) of the Exchange
Act, provides that "[n]o solicitation subject to this regulation shall be
made........ containing any statement of which, at the time and in the light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of a
proxy for the same meeting or subject matter which has become false or
misleading."

16. Chesapeake' preliminary materials relating to the Consent
Solicitation will be filed promptly with the SEC (the "Consent Solicitation
Materials"). Chesapeake believes the Consent Solicitation Materials are in full
compliance with

4
<PAGE> 5
Section 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder by the SEC, including Rule 14a-9. Chesapeake will disseminate to
Shorewood's stockholders the Consent Solicitation Materials disclosing all
material information required by applicable law.

17. In furtherance of the Consent Solicitation, Purchaser is demanding
that Shorewood produce a list of its stockholders and related stocklist
materials.

DECLARATORY RELIEF

18. The Declaratory Judgment Act, 28 U.S.C. (S) 2201, provides that
"[i]n a case of actual controversy within its jurisdiction. . . . any court of
the United States, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking such
declaration." Plaintiffs are entitled to a declaratory judgment that the
Schedule 14D-1 and all exhibits thereto and the Consent Solicitation Materials
are proper and in compliance with all applicable securities laws, rules and
regulations.

19. Although the Tender Offer, Proposed Merger and Proposed Acquisition
are fairly and attractively priced, Plaintiffs reasonably expect that Shorewood
will attempt to thwart or delay Plaintiffs' lawful efforts to consummate the
Tender Offer and pursue the Consent Solicitation. Plaintiffs believe Shorewood
will seek to delay and defeat the Tender Offer and Consent Solicitation through
efforts including the filing of a meritless suit claiming that public
disclosures and filings made by Plaintiffs in conjunction with the Tender Offer
and the Consent Solicitation violate applicable federal securities laws and
regulations. Thus, there is a substantial controversy between parties having
adverse interests which is of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.

20. In the absence of declaratory relief, Plaintiffs will suffer
irreparable harm. As evidenced by the course of action that Shorewood has
pursued to date and the actions taken generally by companies that receive
unsolicited acquisition proposals, Shorewood will likely defend against the
Proposed Acquisition and the Consent Solicitation by, among other things, filing
false claims designed to delay or defeat the Proposed Acquisition and the
Consent Solicitation. A declaratory judgment that the disclosures in the
Schedule 14D-1, the Offer to Purchase and the Consent Solicitation Materials
comply with all applicable federal laws will serve the purpose of adjudicating
the interests of the parties, resolving any complaints concerning the propriety
of the Tender Offer or the Consent Solicitation under federal law and permitting
an otherwise lawful transaction to proceed.

5
<PAGE> 6
21. Plaintiffs therefore request pursuant to the Declaratory Judgment
Act, 28 U.S.C. (S)(S) 2201 and 2202, that this Court enter a declaratory
judgment that the public disclosures and documents filed with the SEC by
plaintiffs and which are being disseminated to Shorewood stockholders in
connection with the Tender Offer and the Consent Solicitation comply fully with
all applicable provisions of law.

WHEREFORE, Plaintiffs respectfully request that this Court:

a. declare that Plaintiffs have disclosed all information
required by, and are otherwise in all respects in compliance with, all
applicable laws and other obligations, including, without limitation,
Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other
federal securities laws, rules or regulations deemed or claimed to be
applicable to the Schedule 14D-1, the Tender Offer, the Consent
Solicitation or the Consent Solicitation Materials;

b. award plaintiffs their costs and disbursements in this
action, including reasonable attorneys' fees; and

c. grant plaintiffs such other and further relief as this
Court may deem just and proper.

/s/ R. Franklin Balotti

---------------------
R. Franklin Balotti
J. Travis Laster
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Attorneys for Plaintiffs

Dated: December 3, 1999

<PAGE> 1
Exhibit 19

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

CHESAPEAKE CORPORATION and
SHEFFIELD, INC.,

Plaintiffs,

v. No.

MARC P. SHORE, HOWARD M.
LIEBMAN, ANDREW N. SHORE,
LEONARD J. VEREBAY, VIRGINIA A.
KAMSKY, SHARON R. FAIRLEY,
R. TIMOTHY O'DONNELL, KEVIN J.
BANNON, WILLIAM P. WEIDNER, and
SHOREWOOD PACKAGING CORPORATION,

Defendants.

COMPLAINT

Plaintiffs Chesapeake Corporation ("Chesapeake") and Sheffield, Inc.
("Purchaser," jointly with Chesapeake, "Plaintiffs"), by and through its
undersigned attorneys, upon knowledge as to themselves and their own acts and
upon information and belief as to all other matters, allege for their complaint
against Marc P. Shore, Howard M. Liebman, Andrew N. Shore, Leonard J. Verebay,
Virginia A. Kamsky, Sharon R. Fairley, R. Timothy O'Donnell, Kevin J. Bannon,
William P. Weidner (collectively, the "Director Defendants") and Shorewood
Packaging Corporation ("Shorewood" or the "Company," together with the Director
Defendants, the "Defendants"), as follows:

NATURE OF THE ACTION

1. Plaintiffs commenced today a fully-financed, non-coercive, non
discriminatory, all-cash, all-shares premium tender offer for Shorewood's common
stock at $17.25 per share (the "Tender Offer"). The $17.25 in cash offered
<PAGE> 2
in the Tender Offer represents approximately a 45% premium over the closing
price of Shorewood's common stock on November 9, 1999, the last full trading day
before Chesapeake made a confidential proposal to acquire Shorewood in a
negotiated transaction at $16.50 per share. The $17.25 in cash offered in the
Tender Offer represents more than a 28% premium above the closing price of
Shorewood's stock on November 17, 1999, the last full trading day before
Shorewood disclosed to the markets Chesapeake's confidential proposal.

2. The Tender offer is the initial step in a two-step transaction pursuant
to which Chesapeake proposes to acquire all of the outstanding shares of
Shorewood. If successful, Chesapeake intends to follow the Tender Offer with a
merger or similar business combination (the "Proposed Merger," together with the
Tender Offer, the "Proposed Acquisition"), in which Shorewood's remaining
stockholders will receive an amount in cash equal to the price paid in the
Tender Offer.

3. Chesapeake also announced today its intention to solicit written
consents from Shorewood's stockholders to take certain actions without a
stockholder meeting (the "Consent Solicitation"). The purpose of the Consent
Solicitation is to obtain sufficient written consents from Shorewood's
stockholders in order to (i) amend Shorewood's Amended and Restated By-laws (the
"Bylaws") to remove the provision establishing a staggered board of directors,
(ii) remove all current members of the Shorewood board of directors (the
"Shorewood Board"), (iii) reduce the authorized number of Shorewood directors to
three, (iv) elect to the Shorewood Board three independent candidates for
director nominated by Chesapeake (the "Nominees"), and (v) repeal any recent or
subsequent amendments to the Bylaws.

4. To commence the Tender Offer, Chesapeake prepared a press release
summarizing the terms of the Tender Offer (the "Press Release") and placed a
summary advertisement of the Tender Offer in the national edition of The Wall
Street Journal (the "Summary Advertisement") for immediate publication in the
next issue. These steps were completed and the Tender Offer and Consent
Solicitation process set in motion at 3:00 p.m. yesterday.

5. After Chesapeake had completed these steps, and admittedly in response
to the Chesapeake Proposal and in anticipation of the Consent Solicitation,
Shorewood announced yesterday evening that the Director Defendants had amended
the Bylaws to adopt various draconian provisions designed purposefully to
interfere with the ability of Shorewood's stockholders to exercise their
franchise rights (collectively, the "Bylaw Amendments"). Among other things, the
Director
<PAGE> 3
Defendants amended the Bylaws to adopt a new Article X, which provides
that "the by-laws may be amended, added to, altered or repealed, or new by-laws
may be adopted...... by the affirmative vote of the holders of not less than two
thirds (2/3) of the stock issued and outstanding as of the record date" (the
"Super-Majority Bylaw").

6. The Super-Majority Bylaw is a blatant and undisguised effort by the
Director Defendants to entrench themselves by disenfranchising Shorewood's
stockholders. The Super-Majority Bylaw is a disproportionate and draconian
defensive response and constitutes a breach of the Director Defendants'
fiduciary duties. The Super-Majority Bylaw also is invalid and ultra vires under
both the Shorewood certificate of incorporation (the "Charter") and Delaware
law.

7. This action seeks declaratory relief invalidating the Bylaw Amendments
and injunctive relief barring Shorewood or any of its directors, officers,
agents or representatives from relying on, implementing, applying or enforcing
the Bylaw Amendments. This action further seeks declaratory and injunctive
relief requiring Shorewood to dismantle its takeover defenses, including its
"poison pill," and enjoining Shorewood from amending the Bylaws further or
taking any other action to defeat the Tender Offer and Proposed Merger or to
thwart the stockholder franchise and frustrate the Consent Solicitation.

THE PARTIES

8. Plaintiff Chesapeake is a corporation incorporated under the laws of
the Commonwealth of Virginia with its principal executive offices located in
Richmond, Virginia. Chesapeake is primarily engaged in the manufacture and sale
of specialty packaging, point-of-purchase displays, and merchandising services.
Chesapeake's shares are listed on the New York Stock Exchange. Chesapeake is the
beneficial owner of shares representing 14.9% of Shorewood's common stock.

9. Plaintiff Purchaser is a corporation incorporated under the laws of the
State of Delaware and a wholly-owned subsidiary of Chesapeake. Purchaser was
formed to acquire all of the outstanding shares of Shorewood through the
Proposed Acquisition. Purchaser is the record owner of 100 shares of Shorewood
common stock.

10. Defendant Marc P. Shore ("Mr. Shore") is the Chairman and Chief
Executive Officer of Shorewood. Mr. Shore is the son of Paul B. Shore, the
founder of the Company. Mr. Shore owns beneficially 955,601 shares of Shorewood
common stock. Through a network of trusts and investment partnerships created
for the benefit of the Shore family, Mr. Shore controls and is deemed to hold
beneficially an additional 3,904,303 shares, more than four times his personal
holdings. In the aggregate, Mr. Shore owns or controls shares representing
17.38%
<PAGE> 4
of the Company's outstanding common stock. In fiscal year 1999, Mr. Shore
received $800,000 in salary, a bonus of $1,093,000, other compensation of
$149,625, and restricted stock awards valued at $825,000, for a total
compensation package immediately worth $2,867,625. He also received options to
purchase an additional 350,000 shares of the Company's stock, which options the
Company valued at $7,699,886 based on an estimated annual appreciation rate for
the Company's stock of 10%. During the same year, the Company's share price
dropped by 36.89% and yielded investors a one year total return of negative
19.14%.

11. Defendant Howard M. Liebman is President, Chief Financial Officer and
a director of Shorewood. In fiscal year 1999, Mr. Liebman received $450,000 in
salary, a bonus of $150,000, other compensation of $107,875, and restricted
stock awards valued at $481,250, for a total compensation package immediately
worth $1,189,125. Mr. Liebman also received options to purchase an additional
150,000 shares of the Company's stock, which options the Company valued at
$3,287,094 based on an estimated annual appreciation rate for the Company's
stock of 10%.

12. Defendant Andrew N. Shore is Vice President, General Counsel,
Secretary and a director of Shorewood. Andrew Shore is the brother of Mr. Shore.
Andrew Shore's compensation is not publicly disclosed.

13. Defendant Leonard J. Verebay is Executive Vice President and a
director of Shorewood. Mr. Verebay's compensation is not publicly disclosed.

14. Defendant Virginia A. Kamsky is a director of Shorewood. Ms. Kamsky is
the founder, chief executive officer, chairman and principal stockholder of
Kamsky Associates, Inc. ("KAI"), which has advised Shorewood for approximately
three years in connection with the establishment of a manufacturing facility in
China. Pursuant to a consulting agreement, Shorewood paid KAI a consulting fee
of $25,000 per month. KAI further is entitled to participate in up to 5% of
Shorewood's allocable share of the "net profits," as defined in the relevant
agreement, from the China facility.

15. Defendant R. Timothy O'Donnell is a director of Shorewood. Mr.
O'Donnell is a President and a principal stockholder of Jefferson Capital Group,
Ltd. ("Jefferson Capital"), an investment banking firm. Jefferson Capital
receives substantial revenues from its services to Shorewood. For example, in
November 1998, Shorewood paid Jefferson Capital a fee of approximately $1.3
million and awarded Jefferson Capital, effective as of October 13, 1998, a
warrant to purchase
<PAGE> 5
50,000 shares of Shorewood common stock at an exercise price of $16 per share,
exercisable upon grant.

16. Defendant Kevin J. Bannon is a director of Shorewood. Mr. Bannon is an
Executive Vice President of Bank of New York, a participant in the Company's
lending syndicate that loans substantial sums to the Company and receives
substantial revenues from the Company's business. For example, at the end of
fiscal year 1999, the Company had aggregate borrowings from the Bank of New York
in the amount of $25,039,500. The Bank of New York also acts as the Company's
transfer agent.

17. Defendants Sharon R. Fairley and William P. Weidner are directors of
Shorewood.

18. Defendant Shorewood is a corporation incorporated under the laws of
the State of Delaware with its principal executive offices located in New York,
New York. Shorewood and its subsidiaries print and manufacture paperboard
packaging through operations in the United States, Canada and China. Shorewood's
common stock is listed and traded on the New York Stock Exchange.

BACKGROUND

Chesapeake Considers An Acquisition of Shorewood

19. In the ordinary course of business, Chesapeake engages in an ongoing
evaluation of potential candidates for acquisitions and strategic transactions.
As part of Chesapeake's business strategy of divesting capital intensive,
cyclical commodity businesses and focusing on value-added, specialty packaging
businesses, Chesapeake identified Shorewood as a potential acquisition candidate
as early as May 1998. Chesapeake at no time considered a potential sale of
Chesapeake to Shorewood.

20. In the first quarter of 1999, Chesapeake acquired Field Group plc (the
"Field Acquisition"). As part of the Field Acquisition, Chesapeake and Shorewood
discussed opportunities for alliances or transactions involving specific target
markets or individual plants. Chesapeake and Shorewood did not discuss a
potential strategic transaction or business combination involving the companies.

21. On October 26, 1999, Mr. Shore called Thomas H. Johnson, President and
Chief Executive Officer of Chesapeake, and proposed an acquisition of
<PAGE> 6
Chesapeake by Shorewood, thereby recognizing the significant value inherent in
a combination of the two companies. On October 27, 1999, Mr. Johnson received a
letter from Mr. Shore dated October 26, 1999, that outlined the terms of a
potential acquisition (the "Shorewood Proposal"). On October 29, 1999, Mr.
Johnson in formed Mr. Shore by letter that Chesapeake was not for sale, but that
he would present the Shorewood Proposal to Chesapeake's board of directors (the
"Chesapeake Board") and that the Chesapeake Board would consider carefully the
Shorewood Proposal.

22. On November 3, 1999, the Chesapeake Board convened a special meeting
to consider the Shorewood Proposal. The Chesapeake Board received presentations
from Chesapeake's management regarding Chesapeake's performance and the
Shorewood Proposal. The Chesapeake Board also received advice from its legal
counsel and from Goldman, Sachs & Co. and Donaldson, Lufkin & Jenrette,
co-financial advisors to the Chesapeake Board. After receiving and considering
this information and advice, the Chesapeake Board unanimously determined that
the Shorewood Proposal was inadequate and not in the best interests of
Chesapeake and its stockholders. The Chesapeake Board instructed Mr. Johnson to
communicate with Mr. Shore and inform him of the Chesapeake Board's decision to
reject the Shorewood Proposal.

23. Also on November 3, 1999, the Chesapeake Board considered a potential
acquisition of Shorewood as one of the strategic acquisitions available to
Chesapeake. Among other things, the Board noted that such an acquisition was
consistent with Chesapeake's strategic plan. The Chesapeake Board further
considered that Chesapeake could unlock significant value in Shorewood's assets
by applying Chesapeake's management and operational strategies and by
incorporating an acquisition of Shorewood into other potential acquisitions
being explored by Chesapeake. At the conclusion of the meeting, the Chesapeake
Board authorized Mr. Johnson to propose an acquisition of Shorewood by
Chesapeake (the "Chesapeake Proposal").

Shorewood Rejects The Chesapeake Proposal

24. On November 10, 1999, Mr. Johnson met with Mr. Shore and communicated
the Chesapeake Board's decision regarding the Shorewood Proposal. Mr. Johnson
then presented Mr. Shore with the Chesapeake Proposal. Mr. Johnson also provided
Mr. Shore with a letter outlining the Chesapeake Proposal. Among other things,
the letter noted that the Chesapeake Proposal was not subject to any financing
condition and that Chesapeake was prepared to commence immediately good faith
negotiations on an exclusive basis with the objective of entering into a
definitive merger agreement consistent with the Chesapeake Proposal.
<PAGE> 7
25. Mr. Shore stated that he would communicate the proposal to the
Shorewood Board but that any meeting would be a "very short one." Mr. Shore thus
implied strongly that he was unwilling to accept or support the Chesapeake
Proposal and that the Shorewood Board, dominated by insiders and individuals
beholden to Mr. Shore, would follow his lead.

Shorewood Publicly Announces The Shorewood Proposal
And The Chesapeake Proposal

26. On the morning of November 18, 1999, Mr. Shore delivered a letter to
Mr. Johnson by facsimile in which he informed Mr. Johnson that the Shorewood
Board had "unanimously and unequivocally rejected" the Chesapeake Proposal. The
Shorewood Board thus had followed Mr. Shore's lead, just as Mr. Shore had
intimated during the November 10, 1999 meeting.

27. Mr. Shore's letter also informed Mr. Johnson that Shorewood would
publicize the Shorewood Proposal and the Chesapeake Proposal, notwithstanding
Chesapeake's desire for the Chesapeake Proposal to remain confidential. Indeed,
at the same time Mr. Shore was sending his letter to Mr. Johnson, Shorewood was
issuing a press release announcing the Shorewood Proposal and publicly
disclosing the confidential Chesapeake Proposal.

28. Later in the day on November 18, 1999, Chesapeake issued a press
release confirming the existence of the Chesapeake Proposal and noting that
Chesapeake was "prepared to commence immediate good faith negotiations on an
exclusive basis with the objective of entering into a definitive merger
agreement consistent with its proposal."

Chesapeake Attempts To Negotiate With Shorewood

29. On November 22, 1999, Mr. Johnson sent a letter to the members of the
Shorewood Board asking them to consider entering into immediate good faith
negotiations with Chesapeake regarding the Chesapeake Proposal. Mr. Johnson
noted the possibility of Chesapeake increasing its offer after appropriate due
diligence and access to the Company's business plan, as well as the possibility
of utilizing alternatives to an all-cash structure that could offer
tax-advantages to certain of Shorewood's stockholders. Chesapeake also issued a
press release announcing Mr. Johnson's letter. Shorewood did not respond to Mr.
Johnson's letter.
<PAGE> 8
30. On November 26, 1999, Chesapeake entered into a stock purchase
agreement with Ariel Capital Management, Inc. ("Ariel") pursuant to which Ariel
agreed to use its best efforts as an investment adviser to exercise its
discretionary authority to cause Ariel's clients to sell approximately 4.1
million shares of Shorewood common stock, representing approximately 14.9% of
Shorewood's outstanding shares, to Chesapeake. Ariel also agreed that if
Chesapeake commenced a public tender offer for Shorewood's common stock prior to
the closing of the purchase agreement, Ariel would use its best efforts as
investment adviser to exercise its discretionary authority to cause its clients
to (i) tender their shares to Chesapeake and (ii) execute any proxies or written
consents in the form solicited by Chesapeake in any proxy or written consent
solicitation commenced in connection with such tender offer.

31. On November 29, 1999, Chesapeake issued a press release announcing its
agreement with Ariel and renewing its offer to the members of the Shorewood
Board to meet and negotiate the terms of an acquisition of Shorewood by
Chesapeake. That same day, Shorewood issued a press release rejecting
Chesapeake's overtures.

Chesapeake Commences The Tender Offer And Consent Solicitation

32. Faced with the Director Defendants' intransigence, Plaintiffs today
commenced the fully-financed, non-coercive, non-discriminatory, all-cash,
all-shares premium Tender Offer. The Tender Offer is conditioned, among other
things, upon (i) the tender and purchase of sufficient Shorewood shares to give
Chesapeake and Purchaser a majority of the outstanding Shorewood shares on a
fully diluted basis, (ii) the exemption of the Tender Offer from Section 203 of
the Delaware General Corporation Law ("Section 203") and (iii) the redemption or
inapplicability of Shorewood's stockholder rights plan (the "Rights Plan").

33. Chesapeake also announced today the Consent Solicitation. The purpose
of the Consent Solicitation is to obtain sufficient consents from Shorewood's
stockholders to take certain actions by written consent without a stockholder
meeting, including (i) amending Shorewood's Bylaws to remove the provision
establishing a staggered board of directors, (ii) removing all current members
of the Shorewood Board, (iii) reducing the authorized number of Shorewood
directors to three, (iv) electing the Nominees to the Shorewood Board, and (v)
repealing any recent or subsequent amendments to the Bylaws. In furtherance of
the Consent Solicitation, Purchaser is demanding that Shorewood produce a list
of its stockholders and related stocklist materials.

34. If elected, the Nominees will consider, subject to their fiduciary
duties to Shorewood's stockholders, (i) redeeming the Rights Plan (or amending
the Rights
<PAGE> 9
Plan to make it inapplicable to the Proposed Acquisition), (ii) approving the
Tender Offer under Section 203, and (iii) taking such other actions as may be
required to expedite the prompt consummation of the Proposed Acquisition.

Shorewood Discloses The Bylaw Amendments

35. To commence the Tender Offer, Chesapeake prepared the Press Release,
which summarizes the terms of the Tender Offer, and placed the Summary
Advertisement in the national edition of The Wall Street Journal for immediate
publication in the next issue. These steps were completed and the Tender Offer
and Consent Solicitation process set in motion at 3:00 p.m. yesterday. Later
that evening, Shorewood disclosed that the Director Defendants had amended the
Bylaws to adopt the draconian Bylaw Amendments, which are designed to
purposefully interfere with the ability of Shorewood's stockholders to exercise
their franchise rights in the Consent Solicitation. Shorewood admitted in its
disclosure document that the Director Defendants adopted the Bylaw Amendments
"as a consequence of an unsolicited proposal" that Shorewood had
received--namely the Chesapeake Proposal.

36. All of the Bylaw Amendments are directed specifically at the stock
holder franchise in a blatant and undisguised attempt to eliminate the right of
the Shorewood's stockholders to control the destiny of their company. For
example, under Shorewood's previous bylaws (the "Old Bylaws"), stockholders of
the Company "owning 20% of the shares of the Corporation then entitled to vote"
could call a special meeting. The Bylaw Amendments purport to eliminate this
right and authorize only the Shorewood Board to call a special meeting.

37. In an even clearer attempt at entrenchment, the Director Defendants
purported in the Bylaw Amendments to eliminate the ability of the stockholders
to remove directors without cause. Article II, Section 3 of the Old Bylaws
expressly provided that "directors may be removed with or without cause." The
Bylaw Amendments ostensibly amend Article II, Section 3 of the Old Bylaws to
provide that directors only may be removed in accordance "with Delaware General
Corporation Law Section 141(k)(1)." Section 141(k)(1) provides that where a
corporation has a staggered board of directors, stockholders only may remove
directors for cause. The new Article II, Section 3 thus attempts to protect the
Director Defendants by eliminating the stockholders' ability to remove them
except for cause (the "For Cause Removal Bylaw"). Yet rather than taking this
action openly, the Director Defendants tried to hide this change from
Shorewood's stockholders by
<PAGE> 10
couching it in a technical reference to the Delaware General Corporation Law.

38. Most egregiously, the Director Defendants enacted a series of
amendments that attempt to eliminate as a practical matter the right of
Shorewood's stockholders to act by written consent. Section 228 of the Delaware
General Corporation Law provides that

Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
such stockholders of a corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents
in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and
voted and shall be delivered to the corporation by delivery to its
registered office in the [State of Delaware].

8 Del. C. (S) 228 (a)

39. Shorewood's Charter does not limit or eliminate the power of
Shorewood's stockholders to act by written consent. To the contrary, the Charter
confirms that the Shorewood Board may not take actions designed to interfere
with the stockholder franchise. Article NINTH of the Charter states:

The power to make, alter, or repeal a By-Law, and to adopt a new ByLaw,
except a By-Law classifying directors for election for staggard [sic.]
terms, shall be vested in the Board of Directors; provided, however, that
the power conferred upon the Board of Directors pursuant to this Article
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws.

(Emphasis added). Shorewood's Charter thus strongly affirms the franchise rights
of Shorewood's stockholders.

40. Like the Charter, the Old Bylaws placed no limitation on the ability
of Shorewood's stockholders to act by written consent. Article IX, Section 1 of
the Old Bylaws provided that

Unless otherwise provided in the Certificate of Incorporation or by law,
any action required to be taken or which may be taken at any annual or
special meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth
the action so taken,
<PAGE> 11
shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares of stock entitled to vote
thereon were present and voted.

Shorewood's Old Bylaws also did not contain any provisions purporting to allow
the Board to set a record date for a consent solicitation, thereby permitting
Shorewood's stockholders to set the record date for action by consent by
delivering a consent to the Company.

41. In the Bylaw Amendments, the Director Defendants adopted a series of
provisions aimed directly at the consent process. First, the Director Defendants
adopted a provision purporting to require any stockholder seeking to have the
stockholders authorize or take corporate action by written consent to "request
the Board of Directors to fix a record date" (the "Consent Record Date Bylaw").
As publicly disclosed, the Consent Record Date Bylaw contains no provision
permitting a stockholder to set the record date absent action by the Board. The
Director Defendants thus attempted to arrogate to themselves exclusive authority
over the setting of a record date for any consent solicitation. This is contrary
to Section 213(b) of the Delaware General Corporation Law, which permits a
stockholder to establish a record date for a consent solicitation in the absence
of action by the board of directors by delivering a signed written consent
setting forth the action taken or proposed to be taken to the corporation. At
the same time, the Director Defendants adopted a new Article IX, Section 1,
which purports to impose requirements on the form of consents and to enlarge the
circumstances under which consents can be revoked. Neither provision nor
anything similar to them existed under the Old Bylaws.

42. Finally, the Director Defendants adopted the Super-Majority Bylaw. It
provides:

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation from time to time may make,
amend, alter or repeal the by-laws of the Corporation. In addition, the
by-laws may be amended, added to, altered or repealed, or new by-laws may
be adopted, at any meeting of stockholders of the Corporation at which a
quorum is present by the affirmative vote of the holders of not less than
two thirds (2/3) of the stock issued and outstanding as of the record date
for stockholders entitled to vote at such meeting.
<PAGE> 12
The Super-Majority Bylaw thus requires the affirmative vote of the holders of
two thirds of the Company's outstanding stock. By contrast, under the Old
Bylaws, a majority of the Company's stockholders--which for action at a
stockholder meeting meant only a majority of a quorum--had the power to amend
the Bylaws. By enacting the Super-Majority Bylaw, the Director Defendants thus
attempted doubly to disenfranchise the Company's stockholders, first by raising
the vote required to a two-thirds majority, and second by raising the universe
for calculating the number of stockholders to all of the outstanding shares.

43. The Super-Majority Bylaw is a blatant attempt to change the rules of
the stockholder voting process in mid-stream and deprive the stockholders of
rights that they enjoyed and to which they are entitled under the corporate
contract. The Super-Majority Bylaw also is a grossly disproportionate response
to the minimal threat, if any, posed by the Chesapeake Proposal and Consent
Solicitation. By enacting the Super-Majority Bylaw, the Director Defendants are
attempting to coerce Shorewood's stockholders into inaction by creating the
impression that their votes will be futile. Indeed, the Director Defendants no
doubt believe that the SuperMajority Bylaw will prevent Shorewood's stockholders
as a practical matter from ever amending the Bylaws. As a group, the Company's
directors and senior officers own 25.09% of Shorewood's common stock. Any
stockholder proposal to make, amend, alter or repeal the Bylaws that is opposed
by Shorewood's officers and directors therefore must obtain the affirmative vote
of 89% of the holders of the remaining shares of the Company's outstanding
stock! The Super-Majority Bylaw thus in practice imposes an 89% super-majority
requirement. This makes success in any proxy or consent solicitation
realistically unattainable for any group of stock holders that is opposed by
Shorewood's officers and directors. The Super-Majority Bylaw therefore is a
preclusive and draconian defense.

The Effect Of The Bylaw Amendments On The Consent Solicitation

44. By adopting the Bylaw Amendments, the Director Defendants have
attempted to interfere purposefully with the stockholder franchise and frustrate
the Consent Solicitation. Without any possible motivation except entrenchment,
the Director Defendants have attempted to change the rules for stockholder
voting by raising the required vote to a two thirds super-majority, which as a
practical matter requires a realistically unattainable 89% super-majority vote.

45. The Bylaw Amendments also represent a wholly-disproportionate and
<PAGE> 13
draconian response by the Director Defendants to a threat that is not legally
cognizable. Faced with a potential consent solicitation in which they could be
voted out of office, the Director Defendants attempted to coerce Shorewood's
stockholders into inaction and to preclude any chance of a successful
solicitation. Moreover, in their rush to protect themselves, the Director
Defendants adopted provisions that are illegal and invalid under the Shorewood
Charter and Delaware law.

46. Viewed as a whole, the actions taken by the Director Defendants
confirm their twin goals of interfering with the stockholder franchise and
entrenching themselves. All of the Bylaw Amendments attempt to limit or
eliminate stockholder voting rights. The Director Defendants specifically have
targeted the consent process by adopting the Consent Record Date Bylaw, which
allows the Director Defendants to manipulate the consent process to their own
advantage. The For Cause Removal Bylaw demonstrates clearly that the sole goal
of the Director Defendants is to insulate themselves and protect their
positions.

47. Chesapeake believes that Shorewood's stockholders will deliver written
consents to Chesapeake sufficient under the Old Bylaws to (i) amend Shorewood's
Bylaws to remove the provision establishing a staggered board of directors, (ii)
remove the Director Defendants, (iii) reduce the authorized number of Shorewood
directors to three, (iv) elect the Nominees and (v) repeal any recent or
subsequent amendments to the Bylaws. The Super-Majority Bylaw is frustrating and
will frustrate the ability of Shorewood's stockholders to exercise their
franchise rights and act by consent to amend the Bylaws--the prerequisite for
all the actions to be taken in the Consent Solicitation--by imposing a two
thirds super-majority requirement, which as a practical matter requires a
realistically unattainable 89% super-majority vote. The Super-Majority Bylaw is
a disproportionate and draconian response to the Consent Solicitation and the
non-coercive, non-discriminatory, premium Tender Offer. The Super-Majority Bylaw
instead is an entrenchment device that interferes purposefully with the
stockholder franchise without any justification. Moreover, the Super-Majority
Bylaw is contrary to Article Nine of the Charter and Delaware law.

IRREPARABLE HARM

48. The Director Defendants' refusal to consider the Chesapeake Proposal
is preventing Shorewood's stockholders from receiving the benefits of a plainly
superior transaction. The Shorewood stockholders cannot rely on the Shorewood
Board to act in their best interests regarding the Chesapeake Proposal because
the Director Defendants have demonstrated that their primary goal is
entrenchment.

49. Until the Director Defendants enacted the Bylaw Amendments,
Shorewood's stockholders had the unfettered right under Delaware law, the
Charter
<PAGE> 14
and the Old Bylaws to act by written consent to amend the Bylaws, remove the
staggered board provision, remove the Director Defendants and elect the
independent Nominees, who will fulfill their fiduciary duties to Shorewood's
stockholders and consider, subject to their fiduciary duties, the Chesapeake
Proposal. Now, Shorewood's stockholders will be frustrated in their efforts to
utilize the consent process by the Super-Majority Bylaw, which makes success in
a consent solicitation realistically unattainable because as a practical matter
it imposes an 89% super-majority requirement. Moreover, even if under some
circumstances a consent solicitation could poll in excess of 90% of a
corporation's outstanding voting power, here the Super-Majority Bylaw will chill
the Consent Solicitation by making Shorewood's stockholders believe that their
votes are meaningless. This type of interference with the stockholder franchise
constitutes irreparable harm. In addition, because Shorewood's stockholders now
have no way to bypass the Director Defendants, Shorewood's stockholders cannot
receive the benefits of the Chesapeake Proposal. This also constitutes
irreparable harm.

50. At the same time, Chesapeake is suffering irreparable harm as a result
of the Bylaw Amendments and the inability of Shorewood's stockholders to receive
the Chesapeake Proposal. The chance to acquire Shorewood represents a unique
opportunity, and the loss of this opportunity constitutes irreparable harm.

51. Unless the Super-Majority Bylaw is enjoined or invalidated by this
Court, the substantial benefits of the Chesapeake Proposal will be forever lost.
The injury to Chesapeake and Shorewood's stockholders will not be compensable in
money damages, and Chesapeake has no adequate remedy at law. The proper remedy
is to enjoin and invalidate the Super-Majority Bylaw and the Bylaw Amendments as
a whole to permit the Consent Solicitation to go forward and the stockholders to
exercise their franchise rights in a free and uncoerced environment.

COUNT I

(Breach of Fiduciary Duty: The Bylaw Amendments)

52. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

53. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.
<PAGE> 15
54. The Director Defendants adopted the Bylaw Amendments as a defensive
response to the Chesapeake Proposal and in anticipation of the Consent
Solicitation. In adopting the Bylaw Amendments, the Director Defendants acted in
haste, without full information and for purposes of entrenchment.

55. As such, the actions of the Director Defendants are in breach of the
fiduciary duties the Director Defendants owe to Shorewood's stockholders under
applicable Delaware law, including the duties of loyalty and care.

56. Plaintiffs have no adequate remedy at law.

COUNT II

(Breach of Fiduciary Duty: The Super-Majority Bylaw
and the Consent Record Date Bylaw)

57. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

58. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.

59. The Director Defendants adopted the Super-Majority Bylaw and the
Consent Record Date Bylaw as a defensive response to the Chesapeake Proposal and
in anticipation of the Consent Solicitation. In responding to the Chesapeake
Proposal and in anticipation of the Consent Solicitation, the Director
Defendants failed to respond to a legally cognizable threat in good faith after
due investigation.

60. The Super-Majority Bylaw is an unreasonable, coercive and preclusive
defensive response. The Super-Majority Bylaw is unreasonable because it is a
dramatically disproportionate response to the minimal threat, if any, posed by
the Chesapeake Proposal and Consent Solicitation. The Super-Majority Bylaw is
coercive because it chills Shorewood's stockholders into voting in favor of the
Director Defendants or not voting at all because the stockholders will believe
their votes to be meaningless. The Super-Majority Bylaw is preclusive because as
a practical matter it imposes a realistically unattainable 89% super-majority
requirement for Shorewood's stockholders to amend, alter or repeal the Bylaws.

61. The Consent Record Date Bylaw is an unreasonable, coercive and
<PAGE> 16
preclusive defensive response because it attempts to eliminate the right of the
stockholders to set a record date and arrogate that authority exclusively to the
Shorewood Board.

62. As such, the actions of the Director Defendants are in breach of the
fiduciary duties the Director Defendants owe to Shorewood's stockholders under
applicable Delaware law.

63. Plaintiffs have no adequate remedy at law.

COUNT III

(Breach of Fiduciary Duty: The Super-Majority Bylaw
and the Consent Record Date Bylaw)

64. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

65. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.

66. The Director Defendants adopted the Super-Majority Bylaw in response
to the Chesapeake Proposal and in anticipation of the Consent Solicitation. By
adopting the Super-Majority Bylaw and the Consent Record Date Bylaw, the
Defendant Directors purposely interfered with the stockholder franchise.

67. The Director Defendants have not and cannot offer any justification
for adopting the Super-Majority Bylaw and the Consent Record Date Bylaw.

68. As such, the actions of the Director Defendants are in breach of the
fiduciary duties the Director Defendants owe to Shorewood's stockholders under
applicable Delaware law.

69. Plaintiffs have no adequate remedy at law.

COUNT IV

(Ultra Vires: The Super-Majority Bylaw
and the Consent Record Date Bylaw)

70. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.
<PAGE> 17
71. Section 109(a) of the Delaware General Corporation Law provides that
directors "shall not divest the stockholders . . . of the power, nor limit their
power to adopt, amend or repeal bylaws." The Super-Majority Bylaw violates this
provision and is void.

72. Section 102(b)(4) of the Delaware General Corporation Law provides
that super-majority provisions may be placed in the certificate of
incorporation. There is no similar authorization for super-majority provisions
in a corporation's bylaws. The Super-Majority Bylaw attempts to circumvent this
statutory scheme and is void.

73. Article Nine of the Charter provides that the Shorewood Board "shall
not divest or limit the power of the stockholders to adopt, amend or repeal
Bylaws." The Super-Majority Bylaw violates this provision and is void.

74. Section 213(b) of the Delaware General Corporation Law permits a
stockholder to establish a record date for a consent solicitation in the absence
of action by the board of directors by delivering a signed written consent
setting forth the action taken or proposed to be taken to the corporation. As
publicly disclosed, the Consent Record Date Bylaw purports to eliminate this
right and is void.

75. Plaintiffs have no adequate remedy at law.

COUNT V

(Breach of Fiduciary Duty: The Rights Plan)

76. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

77. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.

78. In light of the superior value offered to Shorewood stockholders by
the Proposed Acquisition, there is no legitimate reason for the Director
Defendants to retain the Rights Plan. The Director Defendants' failure to redeem
the rights or to render the Rights Plan inapplicable to the Proposed Acquisition
deprives Shorewood's stockholders of the right to maximize their wealth by
selling their Shorewood shares at the premium price offered by the Proposed
Acquisition.

79. The Director Defendants' failure to redeem the rights or to render the
Rights Plan inapplicable to the Proposed Acquisition has no economic
justification, serves no legitimate purpose, and is not a reasonable response to
the Tender Offer
<PAGE> 18
and/or the Proposed Merger, which pose no threat to the interests of Shorewood's
stockholders or to Shorewood's corporate policy and effectiveness. As such, the
actions of the Director Defendants are in breach of the fiduciary duties the
Director Defendants owe to Shorewood's stockholders under applicable Delaware
law.

80. Plaintiffs have no adequate remedy at law.

COUNT VI

(Breach of Fiduciary Duty: Section 203)

81. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

82. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.

83. The Director Defendants are empowered by Section 203 to render the
statute inapplicable to the Proposed Acquisition by approving the Tender Offer.

84. In light of the superior value offered to Shorewood stockholders by
the Proposed Acquisition, there is no legitimate reason for the Director
Defendants to fail to approve the Tender Offer or to fail to take any other
steps necessary to render Section 203 inapplicable to the Proposed Acquisition.
Such failures only have the effect of withholding from Shorewood's stockholders
the right to maximize their wealth by selling their Shorewood shares at the
premium price offered by the Proposed Acquisition.

85. The Director Defendants' failure to approve the Tender Offer or
otherwise render Section 203 inapplicable to the Proposed Acquisition has no
economic justification, serves no legitimate purpose, and is not a reasonable
response to the Proposed Acquisition, which poses no threat to the interests of
Shorewood's stockholders or to Shorewood's corporate policy and effectiveness.
As such, the actions of the Director Defendants are in breach of the fiduciary
duties the Director Defendants owe to Shorewood's stockholders under applicable
Delaware law.

86. Plaintiffs have no adequate remedy at law.

<PAGE> 19
COUNT VII

(Declaratory And Injunctive Relief:
Additional Anti-Takeover Devices)

87. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

88. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.

89. The Tender Offer is non-coercive and non-discriminatory, it is fair to
Shorewood's stockholders, it poses no threat to Shorewood's corporate policy and
effectiveness, and it represents a substantial premium over the market price of
Shorewood common stock prior to the public announcement of the Tender Offer.

90. Adoption of any additional defensive measures against the Tender
Offer, the Proposed Merger, the Consent Solicitation or proposed acquisition, or
the adoption of any additional measure that would prevent a future board of
directors from exercising its fiduciary duties, including, but not limited to,
amendments to the Rights Plan, amendments to the Bylaws, pursuit of alternative
transactions with substantial break-up fees and/or lock-ups, "White Knight"
stock issuances, changes to licensing agreements, or executive compensation
arrangements with substantial payments triggered by a change in control, would
itself be a breach of the Director Defendants' fiduciary duties to Shorewood's
stockholders.

91. Plaintiffs have no adequate remedy at law.

COUNT VIII

(Declaratory And Injunctive Relief: The Consent Solicitation)

92. Plaintiffs repeat and reallege each and every allegation set forth in
the preceding paragraphs as if fully set forth herein.

93. The Director Defendants owe Shorewood's stockholders the highest
duties of care, loyalty and good faith.

94. The Consent Solicitation complies and will comply with the Delaware
law, the Charter and the Old Bylaws.

95. Plaintiffs are entitled to a declaration that Consent Solicitation
complies and will comply with the Delaware law, the Charter and the Old Bylaws.
<PAGE> 20
96. Plaintiffs have no adequate remedy at law.

WHEREFORE, Plaintiffs respectfully request that this Court enter an Order

a. declaring that the Director Defendants have breached their
fiduciary obligations to Shorewood stockholders under Delaware law by
adopting the Super-Majority Bylaw, the Consent Record Date Bylaw, and the
Bylaw Amendments as a whole;

b. declaring that the Super-Majority Bylaw and the Consent Record
Date Bylaw are ultra vires and void;

c. enjoining Shorewood, its directors, officers, employees and
agents from relying on, implementing, applying or enforcing the
SuperMajority Bylaw, the Consent Record Date Bylaw, and the Bylaw
Amendments as a whole;

d. declaring that the Director Defendants have breached their
fiduciary obligations to Shorewood stockholders under Delaware law by
failing to redeem the Rights in response to the Tender Offer;

e. compelling Shorewood and the Director Defendants to redeem the
rights or to render the Rights Plan inapplicable to the Proposed
Acquisition;

f. declaring that the Director Defendants have breached their
fiduciary obligations to Shorewood stockholders under Delaware law by
failing to render Section 203 inapplicable to the Proposed Acquisition;

g. compelling the Director Defendants to approve the Proposed
Acquisition for purposes of Section 203 and enjoin them from taking any
action to enforce or apply Section 203 that would impede, thwart,
frustrate or interfere with the Proposed Acquisition;

h. temporarily, preliminarily and permanently enjoining Shorewood,
its employees, agents and all persons acting on its behalf or in concert
with it from taking any action with respect to the Rights Plan, except to
redeem the rights or render the Rights Plan inapplicable to the Tender
Offer, and from adopting any other Rights Plan or other measures, or
taking
<PAGE> 21
any other action designed to impede, or which has the effect of impeding,
the Tender Offer or the efforts of Chesapeake to acquire control of
Shorewood;

i. temporarily, preliminarily and permanently enjoin Defendants,
their affiliates, subsidiaries, officers, directors and all others acting
in concert with them or on their behalf from bringing any action
concerning the Rights Plan, Section 203, any other defensive measure, the
Tender Offer, the Pro posed Merger, the Consent Solicitation and the
Proposed Acquisition in any other court;

j. declaring that the adoption of any other measure that has the
effect of impeding, thwarting, frustrating or interfering with the Tender
Offer, the Proposed Merger, the Consent Solicitation and the Proposed
Acquisition constitutes a breach of the Director Defendants' fiduciary
duties;

k. enjoining Shorewood and the Director Defendants from adopting any
other measure that has the effect of impeding, thwarting, frustrating or
interfering with the Tender Offer, the Proposed Merger, the Consent
Solicitation and the Proposed Acquisition;

l. enjoining Shorewood and the Director Defendants from taking any
other action to delay, impede, postpone or thwart the voting or other
rights of Shorewood's stockholders in connection with the Consent
Solicitation or otherwise;

m. compelling Shorewood and the Director Defendants to recognize
the ability of Shorewood's stockholders to act by written consent in the
Consent Solicitation;

n. awarding Plaintiffs their costs and disbursements in this action,
including reasonable attorneys' and experts' fees; and

o. granting plaintiffs such other and further relief as this Court
may deem just and proper.

/s/ R. Franklin Balotti

__________________________________
R. Franklin Balotti
J. Travis Laster
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
<PAGE> 22
(302) 658-6541

Attorneys for Plaintiffs

Dated: December 3, 1999

<PAGE> 1
Exhibit 20

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

CHESAPEAKE CORPORATION and
SHEFFIELD, INC.,
Plaintiffs,

V. No.

SHOREWOOD PACKAGING
CORPORATION,
Defendant.

COMPLAINT

JURISDICTION AND VENUE

1. This Court has jurisdiction over this action pursuant to 15 U.S.C.
(S) 78aa, 28 U.S.C. (S) 1331(a) and 28 U.S.C. (S) 1337(a).

2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28
U.S.C. (S) 1391(b).

THE PARTIES

6. Shorewood's common stock is registered pursuant to Section 12(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. (S) 781(b),
and is listed and traded on the NYSE.

THE TENDER OFFER

9. The Tender Offer is the initial step in a two-step transaction
pursuant to which Chesapeake proposes to acquire all of the outstanding shares
of Shorewood

THE CONSENT SOLICITATION

17. In furtherance of the Consent Solicitation, Purchaser is demanding
that Shorewood produce a list of its stockholders and related stocklist
materials.

DECLARATORY RELIEF

WHEREFORE, Plaintiffs respectfully request that this Court:

b. award plaintiffs their costs and disbursements in this
action, including reasonable attorneys' fees; and

c. grant plaintiffs such other and further relief as this
Court may deem just and proper.

/s/ R. Franklin Balotti

---------------------
R. Franklin Balotti
J. Travis Laster
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Attorneys for Plaintiffs

Dated: December 3, 1999

<PAGE> 1
Exhibit 21

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - X
CHESAPEAKE }
CORPORATION and )
SHEFFIELD, INC., )
)
Plaintiffs, )
)
v. )
) No. 17626 NC
MARC P. SHORE, HOWARD M. )
LIEBMAN, ANDREW N. SHORE, )
LEONARD J. VEREBAY, VIRGINIA A. )
KAMSKY, SHARON R. FAIRLEY, )
R. TIMOTHY O'DONNELL, KEVIN J. )
BANNON, WILLIAM P. WEIDNER )
and SHOREWOOD PACKAGING )
CORPORATION, )
)
Defendants. )
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - X

ANSWER, AFFIRMATIVE DEFENSES
AND COUNTERCLAIMS OF DEFENDANTS

Defendants Marc P. Shore, Howard M. Liebman, Andrew
N. Shore, Leonard J. Verebay, Virginia A. Kamsky, Sharon R. Fairley, R. Timothy
O' Donnell, Kevin J. Bannon, William P. Weidner (collectively, the "Director
Defendants") and Shorewood Packaging Corporation ("Shorewood" or the "Company,"
together with the Director Defendants, the "Defendants"), by their undersigned
counsel, answer Plaintiffs' Complaint ("Complaint") in accordance with the
numbered paragraphs thereof as follows:

NATURE OF THE ACTION

1. Admitted in part and denied in part. Admitted that on
December 3,
<PAGE> 2
1999, Plaintiffs commenced a tender offer for Shorewood's common stock at $17.25
per share (the "Tender Offer"). The remaining allegations are denied.

2. Admitted in part and denied in part. Admitted that
Plaintiffs propose to acquire all of the outstanding shares of Shorewood stock
in a two-step transaction of which the Tender Offer is the first step.
Defendants are without knowledge or information sufficient to form a belief as
to Plaintiffs' alleged intentions and anticipations and those allegations are
therefore denied.

3. Admitted in part and denied in part. Denied that the
candidates Chesapeake proposes to nominate for election to the Shorewood Board
of Directors are "independent." The remaining allegations are admitted.

4. Admitted.

5. Admitted in part and denied in part. Admitted that
following the Chesapeake Proposal, the Director Defendants amended the Shorewood
Bylaws ("Bylaws"). Article X speaks for itself and Plaintiffs' incomplete and
misleading characterization thereof is therefore denied. The remaining
allegations are also denied.

6. Denied. To the extent the allegations state legal
conclusions, no response is required.

7. Admitted in part and denied in part. Admitted that this
action seeks declaratory and injunctive relief. Plaintiffs' characterizations of
their claims and the bases therefor are denied.

THE PARTIES

8. Admitted in part and denied in part. Denied that the
percentage of shares of Shorewood's common stock beneficially owned by
Chesapeake is 14.9%. The remaining allegations are admitted.
<PAGE> 3
9. Admitted in part and denied in part. Admitted that
Plaintiff Purchaser is a corporation incorporated under the laws of the State of
Delaware. Defendants are without knowledge or information sufficient to form a
belief as to the remaining allegations and they are therefore denied.

10. Admitted in part and denied in part. Admitted that Mr.
Shore is the Chairman and Chief Executive Officer of Shorewood and the son of
Paul B. Shore, the founder of the Company. The remaining allegations are denied
as incomplete and misleading. By way of further response, Defendants state that
on December 16, 1999, Shorewood filed with the SEC its Schedule 14D-9 ("Schedule
14D-9") setting forth Mr. Shore's compensation and ownership of Shorewood common
stock. Defendants respectfully refer to Schedule 14D-9 for the complete terms
thereof. The allegations relating to Mr. Shore's "control" and "deemed" holdings
are denied as legal conclusions. The allegations relating to the Company's share
price and investment returns are denied as incomplete and misleading. By way of
further response, Defendants state that as of December 15, 1999, the 52-week
high for the market price of the Company's shares was $20.625.

11. Admitted in part and denied in part. Admitted that Howard
M. Liebman is President, Chief Financial Officer and a director of Shorewood.
The remaining allegations are denied as incomplete and misleading. By way of
further response, Defendants respectfully refer to Schedule 14D-9 for the
complete terms of Mr. Liebman's compensation and ownership of Shorewood common
stock.

12. Admitted.

13. Admitted.

14. Admitted.

15. Admitted in part and denied in part. Admitted that Mr.
O'Donnell is a director of Shorewood and the President and principal stockholder
of Jefferson
<PAGE> 4
Capital Group, Ltd. ("Jefferson Capital"), an investment banking firm. Admitted
that Jefferson Capital has served as an investment advisor to the Company on
various matters and that in connection with investment advisory services
rendered by Jefferson Capital, the Company, in November 1998, paid Jefferson
Capital a fee of approximately $1,300,000 and granted Jefferson Capital a
warrant to purchase 50,000 shares of Shorewood common stock at an exercise price
of $16 per share, exercisable upon grant. The remaining allegations are denied.

16. Admitted in part and denied in part. Admitted that Mr.
Bannon is a director of Shorewood and an Executive Vice President of Bank of New
York, a participant in the Company's lending syndicate. Admitted that at the end
of fiscal year 1999, the Company had aggregate borrowings from the Bank of New
York in the amount of $25,039,500. Admitted that the Bank of New York acts as
the Company's transfer agent. The remaining allegations are denied.

17. Admitted.

18. Admitted.

BACKGROUND

19. Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations and they are therefore
denied.

20. Admitted in part and denied in part. Denied that the
discussions took place "[a]s part of" the Field Acquisition. The remaining
allegations are admitted.

21. Denied, except Defendants admit that on October 26, 1999,
Mr. Shore called Mr. Johnson and proposed an acquisition of Chesapeake by
Shorewood; that on October 26, 1999, Mr. Shore wrote to Mr. Johnson outlining
the terms of a potential acquisition; and that on October 29, 1999, Mr. Johnson
informed Mr. Shore that
<PAGE> 5
Chesapeake was not for sale.

22. Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations and they are therefore
denied.

23. Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations and they are therefore
denied.

24. Denied as stated. Admitted that on November 10, 1999, Mr.
Johnson met with Mr. Shore to communicate the Chesapeake Board's decision
regarding the Shorewood Proposal and to present the Chesapeake Proposal. The
letter outlining the Chesapeake Proposal speaks for itself and Plaintiffs'
incomplete characterization thereof is therefore denied.

25. Denied, except Defendants admit that Mr. Shore stated that
he would communicate the Chesapeake Proposal to the Shorewood Board.

26. Admitted in part and denied in part. Admitted that on
November 18, 1999, Mr. Shore delivered a letter to Mr. Johnson by facsimile in
response to the Chesapeake Proposal. The letter speaks for itself and
Plaintiffs' incomplete characterization thereof is therefore denied. The
remaining allegations are also denied.

27. Denied, except Defendants admit that on November 18, 1999,
Shorewood issued a press release. The November 18, 1999 press release and letter
speak for themselves and Plaintiffs' incomplete and misleading characterization
of them is denied.

28. Admitted.

29. Admitted in part and denied in part. Admitted that on
November 22, 1999, Mr. Johnson sent a letter to the members of the Shorewood
Board and that Shorewood did not respond immediately to this letter. The letter
speaks for itself and Plaintiffs' incomplete and misleading characterization
thereof is denied.

30. Admitted.
<PAGE> 6
31. Admitted in part and denied in part. Admitted that on
November 29, 1999, Chesapeake and Shorewood issued press releases. The press
releases speak for themselves and Plaintiffs' incomplete and misleading
characterization of them is denied.

32. Admitted in part and denied in part. Admitted that on
December 3, 1999, Plaintiffs commenced the Tender Offer. Plaintiffs'
characterization of the terms and effect of the Tender Offer is denied as
incomplete and misleading. The remaining allegations are also denied.

33. Admitted.

34. Defendants are without knowledge or information sufficient
to form a belief as to the truth of the allegations and they are therefore
denied.

35. Admitted in part and denied in part. The first two
sentences of Paragraph 35 of the Complaint are admitted. Plaintiffs'
characterization of Shorewood's disclosure documents is denied as incomplete and
misleading. The remaining allegations are also denied.

36. Denied. Plaintiffs' characterization of Shorewood's Old
Bylaws and Bylaw Amendments is denied as incomplete and misleading. The
remaining allegations are also denied.

37. Denied. Plaintiffs' characterization of Shorewood's Old
Bylaws and Bylaw Amendments is denied as incomplete and misleading. The
remaining allegations are also denied.

38. Denied, except Defendants admit that 8 Del. C. Section
228(a) contains the text quoted in Paragraph 38 of the Complaint.

39. Admitted in part and denied in part. Admitted that Article
NINTH of the Charter contains the text quoted in Paragraph 39 of the Complaint.
The remaining allegations are denied. To the extent the allegations state legal
conclusions, no response
<PAGE> 7
is required.

40. Admitted in part and denied in part. Admitted that Article
IX, Section 1 of the Old Bylaws contains the text quoted in Paragraph 40 of the
Complaint. The remaining allegations are denied. To the extent the allegations
state legal conclusions, no response is required.

41. Denied. Plaintiffs' incomplete and misleading
characterization of the Bylaw Amendments is denied. The remaining allegations
are also denied. To the extent the allegations state legal conclusions, no
response is required.

42. Admitted in part and denied in part. Admitted that the
Bylaw Amendments contain the text quoted in Paragraph 42 of the Complaint.
Plaintiffs' incomplete and misleading characterization of the Old Bylaws and the
Bylaw Amendments is denied. The remaining allegations are also denied. To the
extent the allegations state legal conclusions, no response is required.

43. Denied. Plaintiffs' incomplete and misleading
characterization of the Bylaw Amendments is denied. The remaining allegations
are also denied. To the extent the allegations state legal conclusions, no
response is required.

44. Denied.

45. Denied.

46. Denied.

47. Denied. Defendants are without knowledge or information
sufficient to form a belief as to the truth of the allegation concerning
Chesapeake's belief. The remaining allegations are denied. To the extent the
allegations state legal conclusions, no response is required.

48. Denied.
<PAGE> 8
49. Denied. To the extent the allegations state legal
conclusions, no response is required.

50. Denied. To the extent the allegations state legal
conclusions, no response is required.

51. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT I

52. Defendants repeat and reassert their responses to
Paragraphs 1 through 51 of the Complaint as if fully set forth herein.

53. The allegations state legal conclusions to which no
response is required.

54. Denied. To the extent the allegations state legal
conclusions, no response is required.

55. Denied. To the extent the allegations state legal
conclusions, no response is required.

56. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT II

57. Defendants repeat and reassert their responses to
Paragraphs 1 through 56 of the Complaint as if fully set forth herein.

58. The allegations state legal conclusions to which no
response is required.

59. Denied. To the extent the allegations state legal
conclusions, no response is required.

60. Denied. To the extent the allegations state legal
conclusions, no response is required.
<PAGE> 9
61. Denied. To the extent the allegations state legal
conclusions, no response is required.

62. Denied. To the extent the allegations state legal
conclusions, no response is required.

63. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT III

64. Defendants repeat and reassert their responses to
Paragraphs 1 through 63 of the Complaint as if fully set forth herein.

65. The allegations state legal conclusions to which no
response is required.

66. Denied.

67. Denied.

68. The allegations state legal conclusions to which no
response is required.

69. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT IV

70. Defendants repeat and reassert their responses to
Paragraphs 1 through 69 of the Complaint as if fully set forth herein.

71. Denied, except Defendants admit that Section 109(a) of the
Delaware General Corporation Law ("DGCL") contains the text quoted in Paragraph
71 of the Complaint.

72. Denied. To the extent the allegations state legal
conclusions, no response is required.

73. Denied, except Defendants admit that Article NINTH of the
<PAGE> 10
Charter contains the text quoted in Paragraph 73 of the Complaint. To the extent
the allegations state legal conclusions, no response is required.

74. Denied. To the extent the allegations state legal
conclusions, no response is required.

75. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT V

76. Defendants repeat and reassert their responses to
Paragraphs 1 through 75 of the Complaint as if fully set forth herein.

77. The allegations state legal conclusions to which no
response is required.

78. Denied. To the extent the allegations state legal
conclusions, no response is required.

79. Denied. To the extent the allegations state legal
conclusions, no response is required.

80. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT VI

81. Defendants repeat and reassert their responses to
Paragraphs 1 through 80 of the Complaint as if fully set forth herein.

82. The allegations state legal conclusions to which no
response is required.

83. The allegations state legal conclusions to which no
response is required.
<PAGE> 11

84. Denied. To the extent the allegations state legal
conclusions, no response is required.

85. Denied. To the extent the allegations state legal
conclusions, no response is required.

86. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT VII

87. Defendants repeat and reassert their responses to
Paragraphs 1 through 86 of the Complaint as if fully set forth herein.

88. The allegations state legal conclusions to which no
response is required.

89. Denied.

90. The allegations state legal conclusions to which no
response is required.

91. Denied. To the extent the allegations state legal
conclusions, no response is required.

COUNT VIII

92. Defendants repeat and reassert their responses to
Paragraphs 1 through 91 of the Complaint as if fully set forth herein.

93. The allegations state legal conclusions to which no
response is required.

94. The allegations state legal conclusions to which no
response is required.

95. The allegations state legal conclusions to which no
response is required.

96. Denied. To the extent the allegations state legal
conclusions, no

<PAGE> 12

response is required.

WHEREFORE, Defendants respectfully request that this Court
enter judgment in their favor and against Plaintiffs.

COUNTERCLAIMS FOR DECLARATORY AND INJUNCTIVE RELIEF

THE STOCK PURCHASE AGREEMENT WITH ARIEL MAKES
PLAINTIFFS AN "INTERESTED STOCKHOLDER" UNDER SECTION 203

97. Shorewood incorporates as if fully set forth herein its
above responses and objections to the Complaint, including definitions.

98. Ariel Capital Management, Inc. ("Ariel"), a third party,
is a registered investment adviser whose clients beneficially own approximately
5.6 million shares of Shorewood common stock, representing in excess of 20% of
the total Shorewood outstanding common stock. In their Preliminary Consent
Statement filed with the SEC on December 3, 1999 ("Consent Statement"),
Plaintiffs admit that Ariel's position amounts to 20.28% of the outstanding
shares of Shorewood common stock.

99. Ariel admitted in its Schedule 13G statement filed with
the SEC on July 8, 1999 that it held "sole voting power" with respect to
5,524,972 shares of Shorewood common stock held by its clients. (See Exhibit A)

100. On December 8, 1999, Ariel amended its short-form
Schedule 13G, disclosing the existence of the Stock Purchase Agreement and its
holding of "sole voting power" with respect to 5,518,982 shares of Shorewood
common stock held by its clients. (See Exhibit B)

101. Through a Stock Purchase Agreement entered into on
November 26, 1999 (Exhibit C), Ariel effectively ceded that voting power - over
more

<PAGE> 13

than 20% of Shorewood's common stock - to Plaintiffs. As a result, Plaintiffs
and their affiliates have become both an "interested stockholder" and
"associate" of Shorewood within the meaning of Section 203 of the Delaware
General Corporation Law ("Section 203").

102. The Stock Purchase Agreement is designed and intended to
lock up more than 20% of Shorewood's common stock to vote at Plaintiffs'
direction. The Stock Purchase Agreement obligates Ariel to "use its best efforts
as an investment adviser to exercise its discretionary authority to cause
Ariel's Clients to transfer, assign and convey" Shorewood common stock to
Plaintiffs and also to cause Ariel's clients to "execute proxies or written
consents in the form solicited by [Plaintiffs] or any of their affiliates in any
proxy or written consent solicitation" commenced in connection with a tender
offer by the Plaintiffs. Because Ariel has "sole voting power" over virtually
all the shares owned by its clients, these provisions guarantee that more than
20% of Shorewood's common stock will be voted as Plaintiffs direct.

103. Although Plaintiffs and Ariel drafted the Stock Purchase
Agreement to create the appearance of being in compliance with Section 203 (by
purporting to limit the transaction to 4,106,440 shares - or 14.9% of
Shorewood's outstanding shares), this attempt to elevate form over substance
fails: the unambiguous terms of the agreement give Plaintiffs voting control
over more than 20% of the outstanding shares.

104. On the surface, the Stock Purchase Agreement purports to
obligate Ariel to sell only 14.9% of Shorewood's outstanding shares. Moreover,
section 1(c) of the Stock Purchase Agreement provides that the number of
"Purchased Shares" shall be reduced, if necessary, to "one Share less than the
number of Shares that, if purchased,

<PAGE> 14

would cause [Plaintiffs] to be deemed . . . an 'interested stockholder' within
the meaning of Section 203."

105. However, whereas the Stock Purchase Agreement expressly
limits the number of shares that Ariel must sell or tender to 14.9% of
Shorewood's outstanding shares, it places no limit on the number of shares as to
which Ariel must vote at Plaintiffs' direction. Specifically, section 1(d) of
the Stock Purchase Agreement provides that if Plaintiffs or any of their
affiliate commence a tender offer for Shorewood shares:

then Ariel agrees to use its best efforts as investment adviser to
exercise its discretionary authority to cause Ariel's Clients to: (i)
tender the Purchased Shares in such tender offer; and (ii) execute
proxies or written consents in the form solicited by Buyer or any of
its affiliates in any proxy or written consent solicitation commenced
in connection with such tender offer.

Unlike subpart (i) of section 1(d), which focuses on "Purchased Shares", subpart
(ii) contains no such limitation. In essence, Plaintiffs have contracted for the
right to direct the vote of all of the Shorewood shares - more than 20% of the
outstanding - held by Ariel's clients, and have thereby become both an
"interested stockholder" and an "associate" of Shorewood within the meaning of
Section 203.

106. Even apart from section 1(d)'s unambiguous language,
other terms of the Stock Purchase Agreement also make clear that Plaintiffs and
Ariel have an agreement, arrangement and understanding for the purpose of voting
all 5.6 million shares held by Ariel's clients.

107. Plaintiffs and Ariel know that Shorewood's stock is worth
far more than the nominal purchase price under the Stock Purchase Agreement of
$17.25 per share. For instance, on December 6, 1999, Ariel's director of
research was quoted in The Daily Deal as stating that "[i]f Shorewood is sold
it'll fetch a price in the mid-$20 area." Thus, in an attempt to put Shorewood
"in play" while at the same time purporting to comply with Section 203,
Plaintiffs and Ariel devised a contractual structure that would permit

<PAGE> 15

them to give Ariel the potential benefit of bids higher than $17.25 and ensure
that Ariel would vote all of its shares in favor of Plaintiffs' consent
solicitation.

108. Specifically, section 2 of the Stock Purchase Agreement
includes provisions that create a powerful "carrot-and-stick" to make sure that
Ariel votes all of its clients' shares in accordance with Plaintiffs' wishes
(even assuming section 1(d) gave it any choice in that regard - which it does
not). Section 2 provides that Plaintiffs will increase the consideration to
Ariel for the Purchased Shares if they make a tender offer at a price higher
than $17.25 per share - but only if Plaintiffs are successful in acquiring a
majority of Shorewood's outstanding shares or if a third party acquires a
majority of Shorewood's shares.

109. In essence, Plaintiffs have agreed to pay Ariel a
multi-million dollar "bonus" if Ariel succeeds in delivering Shorewood (not just
14.9% of its shares) into their hands. That bargained-for exchange is tantamount
to an agreement for the purpose of voting all 5.6 million of Ariel's shares
within the meaning of Section 203. Plaintiffs' strategy - locking up more than
20% of Shorewood's outstanding shares to vote in their favor, while nominally
purchasing only 14.9% - is precisely the kind of abusive tactic that Section
203's broad language was designed to prevent.

110. If Plaintiffs increase the price of their inadequate
Tender Offer - as they surely must if they are serious about acquiring Shorewood
- - and Shorewood pursues any strategic course other than a sale to a third party,
then Ariel (strongly incentivized by the terms of the Stock Purchase Agreement)
will vote all of its clients' shares in Plaintiffs' favor regardless of its
evaluation of Shorewood's strategic plan. In those circumstances, even if Ariel
determined that Shorewood's strategic plan had a higher value than Plaintiffs'
revised offer, the incentives established in the Stock Purchase Agreement would
still force it to vote all of its clients' shares in Plaintiffs' favor in order
to try to avoid the loss of additional consideration on the 14.9% of Shorewood's
shares it has

<PAGE> 16

promised to sell to Plaintiffs. Thus, by promising Ariel a "bonus" contingent
upon an acquisition of Shorewood, Plaintiffs have locked in Ariel's full support
- - with all of its shares - for Plaintiffs' efforts.

111. For example (and solely for purposes of illustration),
assume Plaintiffs increase the tender offer price to $25 per Shorewood share and
Shorewood proposes a responsive transaction (not involving a third party
acquiring majority ownership) with a value of $30 per share. If Plaintiffs were
successful, Ariel would receive $25 per share on all of its 5.6 million shares
(or approximately $140 million in total). If Shorewood's responsive transaction
is successful, Ariel would receive $30 per share on 1.5 million shares not
purchased by Plaintiffs, but only $17.25 per share on the 4.1 million shares
sold to Plaintiffs (or approximately $115.7 million in total). Since the blended
consideration to Ariel on the higher Shorewood alternative is substantially less
than $25, Ariel would be incentivized by the Stock Purchase Agreement to vote
all shares for the lower $25 proposal.

THE SHOREWOOD BOARD IS PRECLUDED FROM
APPROVING THE PROPOSED MERGER PURSUANT TO SECTION 203

112. On December 3, 1999, Chesapeake commenced a highly
conditional, unsolicited Tender Offer for Shorewood's common stock at $17.25 per
share. On the same day, Plaintiffs filed a Consent Statement with the SEC for
purposes of soliciting written consents from Shorewood's stockholders to take
certain actions without a stockholder meeting (the "Consent Solicitation").
Specifically, Plaintiffs have publicly stated that through the Tender Offer
and/or the Consent Solicitation, they intend to remove the Shorewood Board
without cause and replace it with Plaintiffs' designees, for the purpose of
consummating a "business combination" (the "Proposed Acquisition"). In

<PAGE> 17

light of Plaintiffs' status as an "interested stockholder," the Shorewood Board,
however constituted, would be precluded from approving the Proposed Acquisition
under Section 203.

113. To prevent abusive takeover tactics, Section 203 will
delay for three years a takeover of a Delaware corporation by an "interested
stockholder" (as defined in the statute) unless the transaction has received
prior approval of the Board or is otherwise exempted. Section 203 applies to any
Delaware corporation that has not opted out of its coverage. Shorewood has not
opted out of Section 203 coverage.

114. Section 203's provisions are broadly written to avoid
circumvention of the statute's goals through the elevation of form over
substance. Thus, Section 203 encompasses circumstances where, as here, a
potential acquiror attempts to acquire an interest in more than 15% of the
voting stock of a corporation without formally acquiring ownership or voting
rights.

115. An "interested stockholder" under Section 203 is an
entity that controls or owns more than 15% of the voting stock of a target
corporation. In relevant part, Section 203(c)(5) broadly defines an "interested
stockholder" as:

any person (other than the corporation and any direct or indirect
majority-owned subsidiary of the corporation) that (i) is the owner of
15% or more of the outstanding voting stock of the corporation, or (ii)
is an affiliate or associate of the corporation and was the owner of
15% or more of the outstanding voting stock of the corporation at any
time within the 3-year period immediately prior to the date on which it
is sought to be determined whether such person is an interested
stockholder, and the affiliates and associates of such person. . . .

8 Del. C. Section 203(c)(5).

116. Section 203(c)(9) defines "Owner" broadly as follows:
"Owner," including the terms "own" and "owned," when used with respect
to any stock, means a person that individually or with or through any
of its affiliates or associates:

<PAGE> 18

(i) beneficially owns such stock, directly or indirectly; or

(ii) Has (A) the right to acquire such stock (whether such
right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding,
or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; provided, however, that a
person shall not be deemed the owner of stock tendered
pursuant to a tender or exchange offer made by such person or
any of such person's affiliates or associates until such
tendered stock is accepted for purchase or exchange; or (B)
the right to vote such stock pursuant to any agreement,
arrangement or understanding; provided, however, that a person
shall not be deemed the owner of any stock because of such
person's right to vote such stock if the agreement,
arrangement or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy
or consent solicitation made to 10 or more persons; or

(iii) Has an agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except voting pursuant
to a revocable proxy or consent as described in item (B) of
subparagraph (ii) of this paragraph), or disposing of such
stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or
indirectly, such stock. (emphasis added)

8 Del. C. Section 203(c)(9).

117. The terms "affiliate" and "associate" are defined in
Section 203(c)(1) and (2), respectively, as follows:

"affiliate" means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, another person.

"associate" . . . means (i) any corporation, partnership,
unincorporated association or other entity of which such person is a
director, officer or partner or is, directly or indirectly, the owner
of 20% or more of any class of voting stock. . . .

8 Del. C. Section 203(c)(1) and (2).

<PAGE> 19

118. The Stock Purchase Agreement constitutes an "agreement,
arrangement or understanding" within the meaning of Section 203.

119. Plaintiffs are and will continue to be an "interested
stockholder" and an "associate" of Shorewood within the meaning of Section 203.

120. The Stock Purchase Agreement was not approved in advance
by the Shorewood Board. Therefore, any action by the Shorewood Board (currently
or during the statutorily applicable three-year time period in the future)
purporting to render Section 203 inapplicable to the Proposed Acquisition would
be ultra vires.

THE REMOVAL PROPOSALS ARE
INVALID UNDER SECTION 141 OF THE DGCL

121. The Consent Statement includes a proposal ("Proposal No.
1") to remove from the Shorewood Bylaws the provision establishing a classified
board of directors and to require the annual election of all directors.
Specifically, Proposal No. 1 provides for the amendment of:

Article III, Section 1 of the Amended and Restated By-Laws of the
Company [Shorewood] (the "Amended Bylaws") to remove the provision
establishing a staggered board of directors by deleting the second,
third and fourth sentences of Article III, Section 1 and inserting in
lieu thereof the sentence "Directors shall be elected annually to serve
for one year terms" and amend Article III, Section 2 of the Amended
Bylaws by deleting in the third sentence the phrase "at which directors
of this class are to be elected...."

122. The Consent Statement also contains a proposal which
provides for the removal without cause of the nine current members of the
Shorewood Board ("Proposal No. 2").(1)

- --------
(1) Together, Proposal No. 1 and Proposal No. 2 will be referred to
hereinafter as the "Removal Proposals."

<PAGE> 20

123. The Consent Statement also provides for the election of
Plaintiffs' nominees to the Shorewood Board. ("Proposal No. 4") If the
Plaintiffs' nominees are elected to the Shorewood Board pursuant to Proposal No.
4, they will consider approving the Tender Offer and Proposed Merger under
Section 203 of the DGCL in order to facilitate the prompt consummation of the
Proposed Acquisition.

124. Section 141(d) of the DGCL provides, in pertinent part:
(d) The directors of any corporation organized under this chapter may,
by the certificate of incorporation or by an initial bylaw, or by a
bylaw adopted by a vote of the stockholders, be divided into one, two
or three classes; the term of office of those of the first class to
expire at the annual meeting next ensuing; of the second class one year
thereafter; of the third class two years thereafter; and at each annual
election held after such classification and election, directors shall
be chosen for a full term, as the case may be, to succeed those whose
terms expire. . . .

8 Del. C. Section 141(d) (emphasis added).

125. As permitted by Section 141(d) of the DGCL, the Shorewood
Bylaws currently provide that the Shorewood Board shall be divided into three
classes elected to serve for staggered terms of three years.

126. In accordance with section 141(d) of the DGCL, the
members of the classified Shorewood Board were elected "for a full term" of
three years, except to the extent otherwise provided in Section 141(k). Subpart
(k)(i) of Section 141 provides, in relevant part:

Unless the certificate of incorporation otherwise provides, in the case
of a corporation whose board is classified as provided in subsection
(d) of this section, shareholders may effect such removal only for
cause; *

8 Del. C. Section 141(k).

127. The Shorewood Certificate of Incorporation contains no
provision

<PAGE> 21

authorizing the removal of directors of Shorewood's classified Board without
cause. Accordingly, unless removed for cause, the directors of Shorewood are
entitled to complete the terms in office for which they were duly elected by the
stockholders of Shorewood.

DECLARATORY RELIEF

128. The Court may grant the declaratory relief sought herein
pursuant to 10 Del C. Section 6501 et seq. There exists a substantial
controversy among the parties as to whether (a) Plaintiffs are an "interested
stockholder" of Shorewood within the scope of Section 203; (b) the Shorewood
Board of Directors, as currently constituted or to be constituted in the future
within the time period applicable under Section 203, is prohibited from taking
any action rendering Section 203 inapplicable to the Proposed Acquisition; and
(c) the Removal Proposals are invalid under Section 141.

129. Determination of these issues will afford relief from
uncertainty with respect to the rights, status and legal relations between the
parties.

130. Shorewood has no adequate remedy at law.

WHEREFORE, Defendants respectfully request that the Court
enter a judgment in their favor and against Plaintiffs,

A. declaring that Plaintiffs are (i) an "interested
stockholder" and "associate" of Shorewood within the meaning of Section 203, and
(ii) will remain an "interested stockholder" and "associate" of Shorewood during
the entire time period proscribed by Section 203;

B. declaring that the failure of the Shorewood Board of
Directors (as currently constituted or to be constituted in the future within
the time period proscribed by Section 203) from taking any action rendering
Section 203 inapplicable to the Proposed Acquisition does not constitute a
breach of fiduciary duty;

C. declaring that the Removal Proposals are invalid under
Section

<PAGE> 22

141;

D. preliminarily and permanently enjoining Plaintiffs, their
affiliates and all others acting in concert with them from taking any action in
furtherance of the Removal Proposals; and

E. granting such further relief as the Court deems just and
proper.

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP

__________________________________
Edward P. Welch
Robert S. Saunders
Martina Bernstein
One Rodney Square
Post Office Box 636
Wilmington, Delaware 19899-0636
Telephone: (302) 651-3000
Facsimile: (302) 651-3001
Counsel for Defendants

DATED: December 16, 1999

<PAGE> 1
EXHIBIT 22

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

- - - - - - - - - - - - - - - - - - - - -X
)
CHESAPEAKE CORPORATION and )
SHEFFIELD, INC., )
)
Plaintiffs, )
)
v. ) Civil Action No. 99-830
)
SHOREWOOD PACKAGING )
CORPORATION, )
)
Defendant. )
)
- - - - - - - - - - - - - - - - - - - - -X

ANSWER AND COUNTERCLAIMS
OF SHOREWOOD PACKAGING CORPORATION

Defendant Shorewood Packaging Corporation ("Shorewood" or the
"Company"), by its undersigned counsel, answers Plaintiffs' Complaint
("Complaint") in accordance with the numbered paragraphs thereof as follows:

JURISDICTION AND VENUE
------------------------

1. The allegations in Paragraph 1 of the Complaint state legal
conclusions to which no response is required.

2. The allegations in Paragraph 2 of the Complaint state legal
conclusions to which no response is required.

THE PARTIES
-------------
3. Admitted.

<PAGE> 2

4. Admitted in part and denied in part. Admitted that Plaintiff
Purchaser is a corporation incorporated under the laws of the State of Delaware.
Shorewood is without knowledge or information sufficient to form a belief as to
the remaining allegations and they are therefore denied.

5. Admitted.

6. Admitted.

THE TENDER OFFER
------------------

7. Admitted, except Plaintiffs' characterization of the terms and
effect of the Tender Offer is denied as incomplete and misleading.

8. Admitted in part and denied in part. Admitted that the Tender
Offer price is $17.25 per share in cash. Plaintiffs' characterization of the
terms and effect of the Tender Offer is denied as incomplete and misleading.
Shorewood respectfully refers the Court to Plaintiffs' Offer to Purchase on
Schedule 14D-1 filed with the SEC on December 3, 1999 ("Offer to Purchase").

9. Admitted in part and denied in part. Admitted that Plaintiffs
propose to acquire all of the outstanding shares of Shorewood stock in a
two-step transaction of which the Tender Offer is the first step. Shorewood is
without knowledge or information sufficient to form a belief as to Plaintiffs'
alleged intentions and anticipations and the remaining allegations are therefore
denied.

10. The allegations in Paragraph 10 of the Complaint state legal
conclusions to which no response is required.

11. The allegations in Paragraph 11 of the Complaint state legal
conclusions to which no response is required.

12. Admitted in part and denied in part. Admitted that Section 14(e) of
<PAGE> 3
the Exchange Act, 15 U.S.C. Section 78n(e), contains the text quoted in
Paragraph 12 of the Complaint. The remaining allegations state legal conclusions
to which no response is required.

13. The allegations in Paragraph 13 of the Complaint state legal
conclusions to which no response is required. To the extent the allegations are
factual in nature, Shorewood is without knowledge or information sufficient to
form a belief as to their truth and they are therefore denied.

THE CONSENT SOLICITATION
--------------------------

14. Admitted in part and denied in part. Denied that the candidates
Chesapeake proposes to nominate for election to the Shorewood Board of Directors
are "independent." Shorewood is without knowledge or information sufficient to
form a belief as to the truth of the allegations contained in the last sentence
of Paragraph 14 of the Complaint and they are therefore denied. The remaining
allegations are admitted.

15. Admitted in part and denied in part. Admitted that Rule 14a-9,
17 C.F.R. Section 240.14a-9, promulgated by the SEC under Section 14(a) of the
Exchange Act, contains the text quoted in Paragraph 15 of the Complaint. The
remaining allegations state legal conclusions to which no response is required.

16. Denied as stated. Admitted that certain preliminary materials
relating to the Consent Solicitation have been filed with the SEC. Shorewood is
without knowledge or information sufficient to form a belief as to the truth of
the allegations contained in the last two sentences of Paragraph 16 of the
Complaint and these allegations are therefore denied. To the extent the
allegations state legal conclusions, no response is required.

17. Admitted.

DECLARATORY RELIEF
--------------------

18. Admitted in part and denied in part. Admitted that the
Declaratory
<PAGE> 4
Judgment Act, 28 U.S.C. Section 2201, contains the text quoted in Paragraph 18
of the Complaint. The remaining allegations state legal conclusions to which no
response is required.

19. Denied. Shorewood is without knowledge or information sufficient
to form a belief as to the truth of the allegations regarding Plaintiffs'
expectations and beliefs and these allegations are therefore denied. The
remaining allegations are also denied. To the extent the allegations state legal
conclusions, no response is required.

20. Denied.

21. Admitted in part and denied in part. Admitted that Plaintiffs
seek relief pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections
2201 and 2202. Denied that Plaintiffs are entitled to such relief.

WHEREFORE, Shorewood respectfully requests that this Court enter
judgment in its favor and against Plaintiffs.

COUNTERCLAIMS FOR
-------------------
DECLARATORY AND INJUNCTIVE RELIEF
-----------------------------------

Defendant-Counterclaim Plaintiff Shorewood, upon knowledge as to
itself and upon information and belief as to all other matters, alleges for its
Counterclaims for Declaratory and Injunctive Relief pursuant to Sections 13(d)
and 14(d) and (e) of the Exchange Act (collectively referred to as the "Williams
Act") as follows:

22. Shorewood incorporates as if fully set forth herein its above
responses and objections to the Complaint, including definitions.

PLAINTIFFS' FALSE AND MISLEADING OFFER TO PURCHASE
----------------------------------------------------

23. Section 14(e) of the Exchange Act makes it unlawful "to make any
<PAGE> 5
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made . . . not misleading, or to engage in any
fraudulent, deceptive, or manipulative acts or practices, in connection with any
tender offer." Section 14(e) of the Exchange Act (15 U.S.C. Section 78n(e)).
Section 13(d) of the Exchange Act requires, among other things, that anyone who
acquires more than five percent of any class of equity securities of a company
registered with the SEC file a Schedule 13D statement setting forth (a) the
background and identity of the purchaser; (2) the source of the funds used to
purchase the securities; and (3) the purpose of the acquisition and the
purchaser's future plans and intentions with respect to the issuer. Section
13(d) of the Exchange Act (15 U.S.C. Section 78m(d)). Section 14(d) of the
Exchange Act requires that tender-offerors disclose certain prescribed
information by filing it with the SEC. Section 14(d) of the Exchange Act (15
U.S.C. Section 78(n)(d)). This information includes all the information that is
required in a Schedule 13D statement.

24. Plaintiffs' Offer to Purchase violates the Williams Act by,
among other things, making materially false and misleading statements and
omissions about the financing for the Tender Offer and about Plaintiffs'
intention to consummate a merger with Shorewood (the "Proposed Merger") after
closing the Tender Offer.

25. As set forth more fully below, the Offer to Purchase
misleadingly assures the Shorewood stockholders that the Tender Offer "is not
conditioned" upon Plaintiffs' obtaining financing. This statement is materially
misleading. As a practical matter, the Tender Offer cannot proceed unless
Plaintiffs obtain financing for the purchase of the shares tendered since
Plaintiffs admit in the Offer to Purchase that as of September 30, 1999,
Chesapeake had only $36 million in cash and cash equivalents and only $139.5
million in working capital. The only potential source of financing identified in
the Offer to Purchase is First Union Bank ("First Union"). However, Plaintiffs
cannot satisfy several of the conditions in their loan agreement with First
Union. As a result,
<PAGE> 6
Plaintiffs cannot finance the Tender Offer. Plaintiffs' disclosures to the
contrary are therefore materially false and misleading.

26. Additionally, as a result of Plaintiffs' Stock Purchase
Agreement entered into on November 26, 1999 (the "Stock Purchase Agreement")
(Exhibit A ) with Ariel Capital Management, Inc. ("Ariel"), Plaintiffs have
become an "interested stockholder" of Shorewood within the meaning of Section
203 of the Delaware General Corporation Law (the "DGCL"). To prevent abusive
takeover tactics such as those attempted by Plaintiffs in this case, Section 203
will generally prohibit for three years a business combination between a
Delaware corporation and an "interested stockholder" (as defined in Section
203). The Stock Purchase Agreement fundamentally affects Plaintiffs' ability to
consummate the Proposed Merger pursuant to Section 203. Plaintiffs' failure to
disclose this material fact to the stockholders violates the Williams Act.

27. Further, the Offer to Purchase violates the Williams Act by
giving the stockholders a materially false and misleading impression regarding
the manner in which the Proposed Merger will be effectuated. Plaintiffs have
announced their intent to conduct a consent solicitation to remove without cause
all current members of the Shorewood Board and replace them with Plaintiffs'
hand-picked designees. The Offer to Purchase repeatedly touts the actions to be
taken by those designees, including approval and facilitation of the Proposed
Merger. These statements are materially false and misleading because, even
assuming a Shorewood Board (however constituted) could legally effectuate the
Proposed Merger (which it cannot), the proposed removal without cause of the
Shorewood Board is impermissible.

28. Under the applicable provisions of the DGCL, the current
Shorewood directors, unless removed for cause or otherwise in accordance with
the specific provisions of Section 141(k) of the DGCL, are entitled to complete
their terms in office for which they were duly elected by the Shorewood
stockholders. Therefore,
<PAGE> 7
Plaintiffs' Offer to Purchase - to the extent it is premised upon actions to be
taken after removal of the current directors without cause - is materially false
and misleading and in violation of the Williams Act.

PLAINTIFFS' FALSE AND MISLEADING STATEMENTS AND OMISSIONS
CONCERNING THE SOURCE AND TERMS OF THE TENDER OFFER FINANCING
---------------------------------------------------------------

29. Plaintiffs assure the Shorewood stockholders repeatedly that the
Tender Offer "is not conditioned upon Chesapeake or Purchaser obtaining
financing." Although Plaintiffs certainly are the "masters of their offer,"
these statements are materially misleading because Plaintiffs have no ability to
consummate the Tender Offer without outside financing - which they have not
obtained.

30. According to the Offer to Purchase, as of September 30, 1999,
Chesapeake had only $36 million in cash and cash equivalents and only $139.5
million in working capital. Plaintiffs have estimated, however, that the total
amount of funds required to purchase all of the outstanding shares of Shorewood
stock (other than those owned by Sheffield) on a fully diluted basis pursuant to
the Tender Offer and Proposed Merger together with payment for all related fees
and expenses would be approximately $525 million.

31. In sum, based upon their Offer to Purchase, Plaintiffs are not
in a position to finance the Tender Offer and Proposed Merger in the absence of
outside financing. Thus, in a letter dated November 10, 1999, accepted and
agreed to by First Union and Chesapeake by December 2, 1999 ("Commitment
Letter") Chesapeake stated that it "will require" a loan of up to $750 million
in order to finance the Tender Offer and
Merger.

32. The only potential source of outside financing identified in the
<PAGE> 8
Offer to Purchase is First Union. However, First Union agreed to provide such
financing only upon Plaintiffs meeting certain terms and conditions (summarized
and attached to the Commitment Letter).

33. The First Union financing facility essentially consists of a
series of loans, each subject to a series of specific terms and conditions. The
first such loan, the "Tender Offer Loan", is earmarked for "the purchase of
Shares tendered and purchased pursuant to the Tender Offer."

34. Among other things, the Tender Offer Loan is subject to the
satisfaction of the following conditions ("Tender Offer Loan Conditions"): (a)
"a majority of the Shareholders of Target shall have elected the requisite
number of board of directors to approve the Merger and such majority
Shareholders shall take all requisite actions to amend 'poison pill,' 'shark
repellant' or other similar items (including such actions so that the Tender
Offer is approved pursuant to Section 203 of the Delaware General Corporation
Law or the Administrative Agent being satisfied that the provisions of such
Section 203 are invalid or inapplicable to the Tender Offer and Merger (by
action of Target's Board of Directors or otherwise)) that could prevent or delay
the Merger . . .."; and (b) "the prompt consummation of the Merger after the
Tender Offer Closing Date could not reasonably be expected to be restrained,
prevented or otherwise subject to material adverse conditions."

35. Plaintiffs did not fully disclose these Tender Offer Loan
Conditions or explain their implications to the Shorewood stockholders, in
violation of the Williams Act. For example, the Offer to Purchase does not
adequately disclose, or explain the effect of, the fact that financing for the
Tender Offer (and hence the Tender Offer itself) is contingent on - among other
things - the outcome of Plaintiffs' Consent Solicitation. If Plaintiffs fail in
their bid to have their designees elected to the Shorewood Board, they will not
obtain financing for the Tender Offer.
<PAGE> 9
36. Additionally, the Offer to Purchase fails to disclose the fact
that, even if Plaintiffs' Consent Solicitation were successful, financing would
still fail because the newly elected Shorewood Board (for reasons discussed
fully below) would be incapable of approving the Tender Offer pursuant to
Section 203. As a corollary, the prerequisite satisfaction of the Administrative
Agent that the provisions of Section 203 are inapplicable to the Merger (by
action of Target's Board of Directors or otherwise) and could not prevent or
delay the Merger, is impossible.

37. Due to the applicability of Section 203, Plaintiffs will also be
unable to meet the Tender Offer Loan Condition that "the prompt consummation of
the Merger after the Tender Offer Closing Date could not reasonably be expected
to be restrained [or] prevented." Plaintiffs' failure to disclose this material
fact violates the Williams Act.

38. Finally, the Offer to Purchase is utterly silent as to how the
Plaintiffs intend to finance the Tender Offer in the (assured) event they fail
to meet the Tender Offer Loan Conditions and are therefore unable to obtain
financing from First Union.

39. In sum, although the Offer to Purchase asserts repeatedly that
the Tender Offer is not contingent upon obtaining financing, it discloses no
realistic source of financing. The only purported source of financing identified
by the Plaintiffs is First Union. First Union, however, will not finance the
Tender Offer without the satisfaction of conditions that cannot be satisfied.
Accordingly, the Offer to Purchase is materially false and misleading.

PLAINTIFFS' FALSE AND MISLEADING STATEMENTS AND OMISSIONS
CONCERNING THE SECTION 203 CONDITION
-----------------------------------------------------------
<PAGE> 10
40. According to Plaintiffs, the goal of the Tender Offer is to
ultimately acquire the entire equity interest in Shorewood. Yet the fact that
the Shorewood Board (however constituted) will be statutorily prohibited from
approving such a transaction, is nowhere disclosed. This omission renders the
Offer to Purchase materially false and misleading.

41. Shorewood stockholders are informed that the Tender Offer is
"subject to the condition that . . . the Proposed Merger shall have been
approved pursuant to Section 203 of the DGCL" (the "Section 203 Condition").
However, Plaintiffs' disclosures treat the Section 203 Condition in such a
cavalier fashion as to leave the Shorewood stockholders with the false
impression that once the Tender Offer has been completed, Section 203 approval
is a mere ministerial event, not subject to serious impediments. For example,
stockholders are told that:

Purchaser currently intends, as soon as practicable upon consummation of
the Offer, to propose and seek to have the Company effect a merger or
similar business combination (the "Proposed Merger") between the Company
and Purchaser or an affiliate thereof, pursuant to which each then
outstanding Share . . . would be converted pursuant to the terms of the
Proposed Merger into the right to receive an amount in cash equal to the
per Share price paid pursuant to the Offer . . . .

42. Stockholders are also informed that Plaintiffs intend to solicit
consents in order to, among other things, (i) eliminate the classification of
Shorewood's Board of Directors, (ii) remove Shorewood's entire Board of
Directors without cause and (iii) elect Plaintiffs' designees (who have not been
identified) to constitute Shorewood's entire Board of Directors.

43. Due to Plaintiffs' material omissions, stockholders are left
with the impression that Plaintiffs' designees, once elected, are not only
"expect[ed]" to approve the Proposed Merger, but would indeed be able to do so
under the DGCL, and thereby satisfy the Section 203 Condition.
<PAGE> 11
44. Plaintiffs do not disclose that by their own conduct, they have
disabled the current and any future Shorewood Board from approving a business
combination with Plaintiffs during the three-year statutory period proscribed by
Section 203. Although the facts giving rise to this Section 203 bar are not
directly at issue in this litigation (they are currently the subject of a
Declaratory Judgment Counterclaim in Delaware Court of Chancery), Plaintiffs'
failure to disclose the existence and effect of the Section 203 bar on the
Proposed Merger is at issue, because it violates the Williams Act. Therefore,
the facts underlying Shorewood's Section 203 disclosure claim are summarized
below.

THE STOCK PURCHASE AGREEMENT WITH ARIEL MAKES PLAINTIFFS
AN "INTERESTED STOCKHOLDER" UNDER SECTION 203
----------------------------------------------------------

45. Ariel, a third party, is a registered investment adviser whose
clients beneficially own approximately 5.6 million shares of Shorewood common
stock, representing in excess of 20% of the total Shorewood outstanding common
stock. In their Preliminary Consent Statement filed with the SEC on December 3,
1999 ("Consent Statement"), Plaintiffs admit that Ariel's position amounts to
20.28% of the outstanding shares of Shorewood common stock.

46. Ariel admitted in its Schedule 13G statement filed with the SEC
on July 8, 1999 that it held "sole voting power" with respect to 5,524,972
shares of Shorewood common stock held by its clients. (Exhibit B)

47. On December 8, 1999 Ariel amended its short-form Schedule 13G,
disclosing the existence of the Stock Purchase Agreement and its holding of
"sole voting power" with respect to 5,518,982 shares of Shorewood common stock
held by its clients.
(Exhibit C)
<PAGE> 12
48. Through the Stock Purchase Agreement, Ariel effectively ceded
that voting power - over more than 20% of Shorewood's common stock - to
Plaintiffs. As a result, Plaintiffs and their affiliates have become both an
"interested stockholder" and "associate" of Shorewood within the meaning of
Section 203 of the Delaware General Corporation Law ("Section 203").

49. The Stock Purchase Agreement is designed and intended to lock up
more than 20% of Shorewood's common stock to vote at Plaintiffs' direction. The
Stock Purchase Agreement obligates Ariel to "use its best efforts as investment
adviser to exercise its discretionary authority to cause Ariel's Clients to
transfer, assign and convey" Shorewood common stock to Plaintiffs and also to
cause Ariel's clients to "execute proxies or written consents in the form
solicited by [Plaintiffs] or any of its affiliates in any proxy or written
consent solicitation" commenced in connection with a tender offer by the
Plaintiffs. Because Ariel has "sole voting power" over virtually all the shares
owned by its clients, these provisions guarantee that more than 20% of
Shorewood's common stock will be voted as Plaintiffs direct.

50. Although Plaintiffs and Ariel drafted the Stock Purchase
Agreement to create the appearance of being in compliance with Section 203 (by
purporting to limit the transaction to 4,106,440 shares -- or 14.9% of
Shorewood's outstanding shares), this attempt to elevate form over substance
fails: the unambiguous terms of the agreement give Plaintiffs voting control
over more than 20% of the outstanding shares.

51. On the surface, the Stock Purchase Agreement purports to
obligate Ariel to sell only 14.9% of Shorewood's outstanding shares. Moreover,
section 1(c) of the Stock Purchase Agreement provides that the number of
"Purchased Shares" shall be
<PAGE> 13
reduced, if necessary, to "one Share less than the number of Shares that, if
purchased, would cause [Plaintiffs] to be deemed . . . an 'interested
stockholder' within the meaning of Section 203."

52. However, whereas the Stock Purchase Agreement expressly limits
the number of shares that Ariel must sell or tender to 14.9% of Shorewood's
outstanding shares, it places no limit on the number of shares as to which Ariel
must vote at Plaintiffs' direction. Specifically, section 1(d) of the Stock
Purchase Agreement provides that if Plaintiffs or any of their affiliates
commence a tender offer for Shorewood shares:

then Ariel agrees to use its best efforts as investment adviser to
exercise its discretionary authority to cause Ariel's Clients to: (i)
tender the Purchased Shares in such tender offer; and (ii) execute proxies
or written consents in the form solicited by Buyer or any of its
affiliates in any proxy or written consent solicitation commenced in
connection with such tender offer.

Unlike subpart (i) of section 1(d), which focuses on "Purchased Shares", subpart
(ii) contains no such limitation. In essence, Plaintiffs have contracted for the
right to direct the vote of all of the Shorewood shares - more than 20% of the
outstanding shares - held by Ariel's clients, and have thereby become both an
"interested stockholder" and an "associate" of Shorewood within the meaning of
Section 203.

53. Even apart from section 1(d)'s unambiguous language, other terms
of the Stock Purchase Agreement also make clear that Plaintiffs and Ariel have
an agreement, arrangement and understanding for the purpose of voting all 5.6
million shares held by Ariel's clients.

54. Plaintiffs and Ariel know that Shorewood's stock is worth far
more than the nominal purchase price under the Stock Purchase Agreement of
$17.25 per share. For instance, on December 6, 1999, Ariel's director of
research was quoted in The Daily Deal as stating that "[i]f Shorewood is sold
it'll fetch a price in the mid-$20 area." Thus, in an attempt to put Shorewood
"in play" while at the same time purporting to comply
<PAGE> 14
with Section 203, Plaintiffs and Ariel devised a contractual structure that
would give Ariel the potential benefit of bids higher than $17.25 and ensure
that Ariel would vote all of its shares in favor of Plaintiffs' consent
solicitation.

55. Specifically, section 2 of the Stock Purchase Agreement includes
provisions that create a powerful "carrot-and-stick" to make sure that Ariel
votes all of its clients' shares in accordance with Plaintiffs' wishes (even
assuming section 1(d) gave it any choice in that regard - which it does not).
Section 2 provides that Plaintiffs will increase the consideration to Ariel for
the Purchased Shares if they make a tender offer at a price higher than $17.25
per share - but only if Plaintiffs are successful in acquiring a majority of
Shorewood's outstanding shares or if a third party acquires a majority of
Shorewood's shares.

56. In essence, Plaintiffs have agreed to pay Ariel a multi-million
dollar "bonus" if Ariel succeeds in delivering Shorewood (not just 14.9% of its
shares) into their hands. That bargained-for exchange is tantamount to an
agreement for the purpose of voting all 5.6 million of Ariel's shares within the
meaning of Section 203. Plaintiffs' strategy - locking up more than 20% of
Shorewood's outstanding shares to vote in its favor, while nominally purchasing
only 14.9% - is precisely the kind of abusive tactic that Section 203's broad
language was designed to prevent.

57. If Plaintiffs increase the price of their inadequate Tender
Offer - as they surely must if they are serious about acquiring Shorewood - and
Shorewood pursues any strategic course other than a sale to a third party, then
Ariel (strongly incentivized by the terms of the Stock Purchase Agreement) will
vote all of its clients' shares in Plaintiffs' favor regardless of its
evaluation of Shorewood's strategic plan. In those circumstances, even if Ariel
determined that Shorewood's strategic plan had a higher value than
<PAGE> 15
Plaintiffs' revised offer, the incentives established in the Stock Purchase
Agreement would still force it to vote all of its clients' shares in Plaintiffs'
favor in order to try to avoid the loss of additional consideration on the 14.9%
of Shorewood's shares it has promised to sell to Plaintiffs. Thus, by promising
Ariel a "bonus" contingent upon an acquisition of Shorewood, Plaintiffs have
locked in Ariel's full support - with all of its shares - for Plaintiffs'
efforts.

58. For example (and solely for purposes of illustration), assume
Plaintiffs increase the tender offer price to $25 per Shorewood share and
Shorewood proposes a responsive transaction (not involving a third party
acquiring majority ownership) with a value of $30 per share. If Plaintiffs were
successful, Ariel would receive $25 per share on all of its 5.6 million shares
(or approximately $140 million in total). If Shorewood's responsive transaction
is successful, Ariel would receive $30 per share on 1.5 million shares not
purchased by Plaintiffs, but only $17.25 per share on the 4.1 million shares
sold to Plaintiffs (or approximately $115.7 million in total). Since the blended
consideration to Ariel on the higher Shorewood alternative is substantially less
than $25, Ariel would be incentivized by the Stock Purchase Agreement to vote
all shares for the lower $25 proposal.

THE SHOREWOOD BOARD IS PRECLUDED FROM
APPROVING THE PROPOSED MERGER PURSUANT TO SECTION 203
-------------------------------------------------------

59. In light of Plaintiffs' status as an "interested stockholder,"
the Board does not have the power to approve the Proposed Merger under Section
203.

60. Section 203 applies to any Delaware corporation that has not
opted out of its coverage. Shorewood has not opted out of Section 203 coverage.

61. Section 203's provisions are broadly written to avoid
circumvention of the statute's goals through the elevation of form over
substance. Thus, Section 203 encompasses circumstances where, as here, a
potential acquiror attempts to

<PAGE> 16
acquire an interest in more than 15% of the voting stock of a corporation
without formally acquiring ownership or voting rights.

62. An "interested stockholder" under Section 203 is an entity that
controls or owns more than 15% of the voting stock of a target corporation. In
relevant part, Section 203(c)(5) broadly defines an "interested stockholder" as:

any person (other than the corporation and any direct or indirect
majority-owned subsidiary of the corporation) that (i) is the owner of 15%
or more of the outstanding voting stock of the corporation, or (ii) is an
affiliate or associate of the corporation and was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the
3-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder; and the
affiliates and associates of such person . . . .

8 Del. C. Section 203(c)(5).

63. Section 203(c)(9) defines "owner" broadly as follows: "owner,"
including the terms "own" and "owned" when used with respect to any stock
means a person that individually or with or through any of its affiliates
or associates:

(i) beneficially owns such stock, directly or indirectly; or

(ii) has (A) the right to acquire such stock (whether such right is
exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding, or upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a person shall not be deemed the
owner of stock tendered pursuant to a tender or exchange offer
made by such person or any of such person's affiliates or associates
until such tendered stock is accepted for purchase or exchange; or
(B) the right to vote such stock pursuant to any agreement,
arrangement or understanding; provided, however, that a person shall
not be deemed the owner of any stock because of such person's right
to vote such stock if the agreement, arrangement or understanding to
vote such stock arises solely from a revocable proxy or consent
given in response to a proxy or consent solicitation made to 10 or
more persons; or
<PAGE> 17
(iii) has an agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except voting pursuant
to a revocable proxy or consent as described in item (B) of
clause (ii) of this paragraph), or disposing of such stock
with any other person that beneficially owns, or whose
affiliates or associates beneficially
own, directly or indirectly, such stock.

8 Del. C. Section 203(c)(9)(emphasis added).
64. The terms "affiliate" and "associate" are defined in
Section 203(c)(1) and (2), respectively, as follows:
"affiliate" means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, another person.

8 Del. C. Section 203(c)(1) and (2) (footnote omitted, emphasis omitted).

65. The Stock Purchase Agreement constitutes an "agreement,
arrangement or understanding" within the meaning of Section 203.

66. Plaintiffs are and will continue to be an "interested
stockholder" and an "associate" of Shorewood within the meaning of Section 203.

67. The Stock Purchase Agreement was not approved in advance
by the Shorewood Board. Therefore, any action by the Shorewood Board (currently
or during the statutorily applicable three-year time period in the future)
purporting to render Section 203 inapplicable to the Proposed Merger would be
ultra vires. This material fact is omitted from the Offer to Purchase, in
violation of the Williams Act.

68. Moreover, the statements the Plaintiffs do make about the
Stock Purchase Agreement are materially misleading because they leave Shorewood
<PAGE> 18
stockholders with the false impression that the Stock Purchase Agreement did not
result in Plaintiffs' becoming an "interested stockholder" of Shorewood.

69. The Offer to Purchase focuses on the 14.9% ownership
provision, thereby misleading Shorewood's stockholders into believing that
Plaintiffs have stopped short of becoming an "interested stockholder" of
Shorewood. Plaintiffs' failure to disclose the voting arrangement or the
underlying economic reality of the Stock Purchase Agreement and Plaintiffs'
resulting status as an "interested stockholder" is materially misleading and in
violation of the Williams Act.

PLAINTIFFS' FALSE AND MISLEADING STATEMENTS AND OMISSIONS
RELATING TO FUTURE ACTIONS BY THE SHOREWOOD DIRECTORS
-----------------------------------------------------------

70. The Tender Offer is premised (and indeed conditioned) upon
Plaintiffs' "expectation" that certain actions will be taken by a newly-elected
Shorewood Board consisting entirely of Plaintiffs' designees.

71. The Offer to Purchase explains the steps Plaintiffs
propose to take in order to place their designees on the Shorewood Board. Among
other things, Plaintiffs will seek consents to remove the Shorewood by-law
provision establishing a classified board of directors and to require the annual
election of all directors. Additionally, the proposed consent solicitation
contains proposals to remove without cause the nine current members of the
Shorewood Board and to elect Plaintiffs' designees to the Shorewood Board. The
material information Plaintiffs omit to mention is that their proposals are
invalid under Section 141 of the DGCL and therefore cannot succeed.

72. Although the validity of Plaintiffs' proposals under
Section 141 are not directly at issue in this litigation (they are currently the
subject of a Declaratory Judgment Counterclaim in Delaware Court of Chancery),
Plaintiffs' failure to disclose the
<PAGE> 19
existence and effect of Section 141 on the Proposed Merger is at issue, because
it violates the Williams Act.

73. As permitted by Section 141(d) of the DGCL, the Shorewood
Bylaws currently provide that the Shorewood Board shall be divided into three
classes elected to serve for staggered terms of three years. Under the
applicable provisions of the DGCL, the members of the classified Shorewood Board
are entitled to serve a full three-year term, and the shareholders may effect
their removal only for cause, or, if Shorewood's certificate of incorporation so
provides, without cause. See 8 Del. C. Section 141(k). Shorewood's certificate
of incorporation does not provide for removal of directors without cause.
Plaintiffs' disclosures premised upon the removal of those directors without
cause are therefore materially false and misleading in violation of the Williams
Act.

PLAINTIFFS' FALSE AND MISLEADING SCHEDULE 13D
-----------------------------------------------

74. On November 30, 1999, Plaintiffs filed a Schedule 13D with
the SEC disclosing that Chesapeake had entered into the Stock Purchase Agreement
to purchase 4,106,440 shares, or approximately 14.9% of Shorewood's outstanding
shares, for $17.25 per share.

75. For the reasons previously alleged, Plaintiffs'
disclosures regarding the terms and effects of the Stock Purchase Agreement, and
Plaintiffs' beneficial ownership arising therefrom are materially false and
misleading and omit to state material facts necessary in order to make the
statements made not misleading, in violation of the Williams Act.

DECLARATORY AND INJUNCTIVE RELIEF
-----------------------------------

76. The Court may grant the declaratory relief sought herein
pursuant to 28 U.S.C. Section 2201. There exists a substantial controversy among
the parties as to whether the Offer to Purchase and Schedule 13D are materially
false and misleading in
<PAGE> 20
violation of the Williams Act.

77. Determination of these issues will afford relief from
uncertainty with respect to the rights, status and legal relations between the
parties.

78. Shorewood has no adequate remedy at law.

WHEREFORE, Shorewood respectfully requests that the Court
enter a judgment in its favor and against Plaintiffs,

a. declaring that Plaintiffs' Offer to Purchase and Schedule
13D violate the Williams Act;

b. preliminarily and permanently enjoining Plaintiffs from
proceeding with the Tender Offer in violation of the Williams Act; and

c. granting Shorewood such further relief as the Court deems
just and proper.

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP

-------------------------------
Edward P. Welch (Bar I.D. No. 671)
Robert S. Saunders (Bar I.D. No. 3027)
Martina Bernstein (Bar I.D. No. 3806)
One Rodney Square
Post Office Box 636
Wilmington, Delaware 19899-0636
Telephone: (302) 651-3000
Facsimile: (302) 651-3001
Counsel for Defendant Shorewood
Packaging Corporation

DATED: December 16, 1999